| 来源类型 | Discussion paper |
| 规范类型 | 论文 |
| 来源ID | DP3431 |
| DP3431 Incomplete Pass-Through and the Welfare Effects of Exchange Rate Variability | |
| Alan Sutherland | |
| 发表日期 | 2002-06-20 |
| 出版年 | 2002 |
| 语种 | 英语 |
| 摘要 | In many security markets, dealers trade with their regular clients at a discount relative to prevailing bid and ask quotes. In this article we provide an explanation to this phenomenon. We consider a dealer and an investor engaged in a long-term relationship. The dealer assigns a reputational index to his client. This index increases (reputation decreases) when the client conducts trades which results in a loss for the regular dealer. The dealer grants a price improvement if and only if the client?s index is smaller than a threshold and suspends price improvements otherwise. We show that this pricing strategy induces the investor to refrain from exploiting private information against their regular dealer. We also find that it worsens the quotes posted by other dealers. For this reason, there are cases in which the investor is better off if long-term relationships are impossible (for instance, if trading is anonymous). Our model predicts that a dealer?s decision to grant a price improvement depends on their past trading profits with the trader requesting the improvement. |
| 主题 | Financial Economics |
| 关键词 | Market microstructure Reputation and implicit contracts Non-anonymous trading |
| URL | https://cepr.org/publications/dp3431 |
| 来源智库 | Centre for Economic Policy Research (United Kingdom) |
| 资源类型 | 智库出版物 |
| 条目标识符 | http://119.78.100.153/handle/2XGU8XDN/532450 |
| 推荐引用方式 GB/T 7714 | Alan Sutherland. DP3431 Incomplete Pass-Through and the Welfare Effects of Exchange Rate Variability. 2002. |
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