The widespread use of market-making algorithms in electronic over-the-counter markets may give rise to unexpected effects resulting from the autonomous learning dynamics these algorithms. In particular possibility “tacit collusion” among market makers has increasingly received regulatory scrutiny. We model interaction a dealer as stochastic differential game intensity control with partial infor...

In this paper, I pursue three goals. The first is to model collusion in a way that is distinct from noncooperative collusion. The second and third are to develop a particular specification of a standard model of noncooperative collusion that permits explicit solution for equilibrium outputs and reversion thresholds and to extend this analysis to allow for a deterrence-based competition policy t...

We investigate asymmetric price transmission (APT) in laboratory experiments and find that imperfect tacit collusion is likely the cause our otherwise frictionless markets. vary number of sellers across markets to evaluate role competition plays APT. report similar magnitudes asymmetry with 3, 4, 6, 10 sellers, but not duopolies. Furthermore, consistently set their prices above best-response le...