Abstract
This article provides a game theoretic model of price formation and order placement decisions in a dynamic limit order market. Investors can choose to either post limit orders or submit market orders. Limit orders result in better execution prices but face a risk of non-execution and a winner's curse problem. Solving for the equilibrium of this dynamic game, closed-form solutions for the order placement strategies are obtained. Thus, testable implications for the cross-sectional behavior of the mix between market and limit orders and trading costs in limit order markets are derived.
Full Text 
Sign-in/Register to access full text options
Sign-in/Register to access full text options 
Paper version not known
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
