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November 28, 2025International Economic Review

Search and Inventory in Over‐the‐Counter Markets

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Authors

EDEvan DudleyHSHongfei SunCDchengjie diao

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Overview

Analysis identifies search effort and inventory costs in corporate bonds, suggesting reduced dealer power lowers transaction costs.

Key Points

  • Transaction costs are minimized when core dealer bargaining power is reduced, indicating efficiency gains.
  • Found that search effort significantly influences inventory costs in the market for corporate bonds.
  • Structural estimates validate the centrality premium across different transaction types and trade count deciles.
  • Core dealers have a distinct advantage affecting transaction costs, highlighting potential market adjustments needed.

Cite This Study

Dudley et al. (2025) studied this question.

synapsesocial.com/papers/6928f113a65b730b9ea79db8https://doi.org/10.1111/iere.70040
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Also Consider

Synapse has enriched 5 closely related papers on similar clinical questions. Consider them for comparative context:

  1. 1Search and Inventory in Over‐the‐Counter Markets2025
  2. 2Understanding Dealers and their Counterparty Networks in Over-The-Counter (OTC) Markets2026
  3. 3Search Frictions in Over‐the‐Counter Foreign Exchange Markets: Theory and Evidence2025
  4. 4Over‐the‐Counter Markets for Nonstandardized Assets2025
  5. 5Information Friction in OTC Interdealer Markets2024