On the Evolution of Market Institutions: The Platform Design Paradox

Carlos Alós-Ferrer, Georg Kirchsteiger and Markus Walzl

Economic Journal, 2010, vol. 120, issue 543, 215-243

Abstract: We study competition among market designers who create new trading platforms, when boundedly rational traders learn to select among them. We ask whether 'Walrasian' platforms, leading to market-clearing trading outcomes, will dominate the market in the long run. If several market designers compete, we find that traders learn to select non-market clearing platforms with prices systematically above the market-clearing level, provided at least one such platform is introduced by a market designer. This in turn leads market designers to introduce non-market clearing platforms. Hence platform competition induces non-competitive market outcomes. Copyright © The Author(s). Journal compilation © Royal Economic Society 2009.

Date: 2010
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Related works:
Working Paper: On the Evolution of Market Institutions: The Platform Design Paradox (2010)
Working Paper: On the Evolution of Market Institutions: The Platform Design Paradox (2007)
Working Paper: On the Evolution of Market Institutions: The Platform Design Paradox (2006)
Working Paper: On the evolution of market institutions: the platform design paradox (2006)
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