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The Review of financial studies
A standard presumption of market microstructure models is that competition between riskneutral market makers inevitably leads to price schedules that leave market makers zero expected profits conditional on the order flow. This article documents an important lack of robustness of this zero-profit result. In particular, we show that if traders can split orders between market makers, then market makers set less-competitive price schedules that earn them strictly positive profits and hence raisedoi:10.1093/rfs/10.1.69 fatcat:sgunby3ijffqhbjpwlxuujnq3m