On the Evolution of Market Institutions: The Platform Design Paradox

Carlos Alós-Ferrer, Georg Kirchsteiger and Markus Walzl

No 2012, CESifo Working Paper Series from CESifo

Abstract: We study competition among market designers who create new trading platforms, when boundedly rational traders learn to select among them. We ask whether efficient platforms, leading to market - clearing trading outcomes, will dominate the market in the long run. If several market designers are competing, 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.

Keywords: market institutions; evolution of trading platforms; learning; asymmetric rationality (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (1)

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