Briefing
How Secondary Trade Affects Social Welfare in an Over-the-Counter Market
Abstract: Over-the-counter markets with secondary trade and an unfixed quantity of assets suffer from inefficiency stemming from a double-sided hold-up problem between consumers and intermediaries. The inefficiency cannot be resolved through bargaining power alone, since efficiency would require both intermediaries and consumers to have full bargaining power. A budget neutral tax/subsidy scheme could resolve this inefficiency and increase social welfare by up to 13.3 percent.
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https://www.richmondfed.org/publications/research/economic_brief/2025/eb_25-46
Description: Briefing
Bibliographic Information
Provider: Federal Reserve Bank of Richmond
Part of Series: Richmond Fed Economic Brief
Publication Date: 2025-12-29
Volume: 25
Issue: 46