caa a22 4500 397544820 CHVBK 20180308164736.0 cr unu---uuuuu 161202e199610 xx s 000 0 eng 10.2307/2297793 doi (NATIONALLICENCE)oxford-10.2307/2297793 Spulber Daniel F. Northwestern University Market Making by Price-Setting Firms [Elektronische Daten] [Daniel F. Spulber] A model of market making by firms with heterogeneous consumers, suppliers and price-setting intermediaries is examined. Consumers and suppliers engage in time-consuming search for the best price and discount future returns. There exists a unique symmetric equilibrium pricing strategy. In equilibrium, there are non-degenerate distributions of ask and bid prices that straddle the Walrasian price. As the discount rate goes to zero, the ranges of the bid and ask prices, and the total output approach the Walrasian equilibrium values. As the discount rate becomes large, the ask and bid prices approach the monopoly pricing policies. An increase in the discount rate leads to an increase in the equilibrium number of active firms, profit per firm, the mean spread between ask and bid prices, and the variance of ask and bid prices, while lowering the number of active consumers and suppliers. The model is extended to examine the steady-state market equilibrium with continual entry and exit of consumers and suppliers. © 1996 The Review of Economic Studies Limited The Review of Economic Studies Wiley-Blackwell 63/4(1996-10), 559-580 0034-6527 63:4<559 1996 63 restud https://doi.org/10.2307/2297793 text/html Onlinezugriff via DOI 1 research-article jats NATIONALLICENCE 856 40 https://doi.org/10.2307/2297793 text/html Onlinezugriff via DOI NATIONALLICENCE 100 1- Spulber Daniel F. Northwestern University NATIONALLICENCE 773 0- The Review of Economic Studies Wiley-Blackwell 63/4(1996-10), 559-580 0034-6527 63:4<559 1996 63 restud Metadata rights reserved CC BY-NC-4.0 http://creativecommons.org/licenses/by-nc/4.0 nationallicence BK010053 XK010053 XK010000 NATIONALLICENCE NATIONALLICENCE NL-oxford