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Title:On the evolution of market institutions: the platform design paradox PDF Logo
Authors:Alós-Ferrer, Carlos
Kirchsteiger, Georg
Walzl, Markus
Issue Date:2007
Series/Report no.:CESifo working paper 2012
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.
JEL:C72
D4
D83
L1
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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