Distressed sales and liquidity in OTC markets

We present a stylized model of the over-the-counter (OTC) markets in the tradition of Duffie, Gârleanu, and Pedersen 2005 with three distinctive features: (i) Buyers' willingness to pay is private information. (ii) Dividends depend on the state of the macro economy. (iii) Sellers become financially distressed if they cannot sell for too long. Unlike the existing body of work in this literature the probability of trade is endogenous, which in turn opens the door to many interesting results, such as liquidation sales, predation and boom and bust cycles