schemes affect liquidity provision and asset prices. Investors face a trade-off between risk and return. At the benefit of a … liquidity provision to force traders to trade at a lower price. By contrast, bonus caps make traders value the asset less than … investors. This should encourage liquidity provision and decrease prices. In contrast to these predictions, we find that under …

We conduct a field experiment to see if market liquidity has a causal effect on price efficiency and, if so, why. We … randomly provide liquidity in certain horse race betting markets, and not in others. We find that prices in treated markets are …