The question of whether a monopolist market maker can produce a socially superior outcome than competing duopolist market makers under asymmetric information remains unresolved despite several empirical studies of extensive financial market data. We examine the effects of dealer competition and asymmetric information in a continuous multiple-dealer experimental market in which human subjects trade a single security. We find that contrary to extant theory, a duopoly market structure is more resilient than a monopoly market structure under a severe asymmetric information environment. A quantal response equilibrium model is presented to explain some of the market features.
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