Simultaneous Multilateral Search
This paper studies simultaneous multilateral search (SMS) in over-the-counter (OTC) markets: when searching, a customer contacts several dealers and then trades with the one offering the best quote. Search intensity (how frequently one can search) and search capacity (how many potential counterparties one can contact) affect market qualities differently. Higher search capacity might hurt welfare. Contrasting SMS to bilateral bargaining (BB), the model shows that customers might favor BB over SMS when in distress. Such preference for BB might be inefficient and suggests an intrinsic hindrance in the adoption of request-for-quote type of electronic trading in OTC markets.