Intermediated Markets with Posted Prices

We consider a model of intermediated trade for a financial asset. Agents' valuation for the asset includes both a private and a common value component. A third party posts a price at which trade can occur, and a buyer and seller simultaneously decide whether to accept or reject the trade. We show that trade can be ex post inefficient, in the sense that a high value seller sells the good to a lower value buyer. Under specified conditions, any price at which trade occurs leads to inefficient trade with positive probability. We compare two objectives: volume maximization and welfare maximization. With symmetric priors over agents' private values, these lead to the same outcome, but, in general, imply different prices. Both objectives imply that a consummated trade is inefficient with positive probability. We consider two notions of informativeness, value informativeness and allocative informativeness. There is a tradeoff between informativeness and volume or welfare. In particular, small transactions costs, which reduce the volume of trade, can improve the informativeness of the outcome.