Exchange Competition, Entry, and Welfare

Xavier Vives and Giovanni Cespa

No 13415, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We assess the consequences for market quality and welfare of different entry regimes and exchange pricing policies, integrating 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-Ã -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.

Keywords: Market fragmentation; Welfare; Endogenous market structure; Platform competition; Cournot with free entry; Industrial organization of exchanges (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 (search for similar items in EconPapers)
Date: 2018-12
New Economics Papers: this item is included in nep-com, nep-gth, nep-mic and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Exchange Competition, Entry, and Welfare (2022)
Working Paper: Exchange Competition, Entry, and Welfare (2018)
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