Central dealers thrive in OTC markets, driving information diffusion and profits
The article explores how trading works in over-the-counter markets where dealers have private information. Dealers can trade with each other based on their connections in a network. The study shows that information spreads through prices, regardless of dealers' trading strategies. Trade decentralization can either help or hurt overall welfare. Dealers who are more central in the network tend to learn more, trade more, and make higher profits.