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    Market power, ambiguity, and market participation


    Qiu, Zhigang, Wang, Yanyi and Zhang, Shunming (2023) Market power, ambiguity, and market participation. Journal of Financial Markets, 62. p. 100761. ISSN 1386-4181

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    Abstract

    We investigate how market power or price impact of market makers affects the participation decisions of investors with ambiguity aversion. Limited participation exists because some investors are ambiguous about the asset fundamental, but the market power of market makers mitigates limited participation. As a result, when market makers become less competitive, the non-participation range decreases, while return volatility increases; thus, market makers and ambiguity-averse investors are better off, but investors with liquidity needs are worse off. However, the non-participation range and uninformed investors’ welfare can increase or decrease when information is more asymmetric, depending on the importance of liquidity demand.
    Item Type: Article
    Keywords: Price impact; Imperfect competition; Limited participation; Nash equilibrium; Ambiguity aversion;
    Academic Unit: Faculty of Social Sciences > School of Business
    Item ID: 20656
    Identification Number: 10.1016/j.finmar.2022.100761
    Depositing User: Yanyi Wang
    Date Deposited: 08 Oct 2025 09:27
    Journal or Publication Title: Journal of Financial Markets
    Publisher: Elsevier
    Refereed: Yes
    Related URLs:
    URI: https://mural.maynoothuniversity.ie/id/eprint/20656
    Use Licence: This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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