Review of Financial Studies Vol. 35 No. 5 2022
Exchange Competition, Entry, and Welfare
Abstract
We assess the consequences for market quality and welfare of different entry regimes and exchange pricing policies. To do so, we integrate a microstructure model with a free-entry, exchange competition model where exchanges have market power in technological services. Free-entry delivers superior liquidity and welfare outcomes vis-á-vis an unregulated monopoly, but entry can be excessive or insufficient. Depending on the extent of the monopolist’s technological services undersupply compared to the first best, a planner can achieve a higher welfare controlling entry or platform fees. Review of Financial Studies, forthcoming
- DOI
- 10.1093/rfs/hhab101
- Volume
- 35
- Issue
- 5
- Pages
- 2570-2624
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref