Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/198792 
Year of Publication: 
2018
Series/Report no.: 
CESifo Working Paper No. 7432
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We assess the consequences for market quality and welfare of different entry regimes and exchange pricing policies in a context of limited market participation. To this end we integrate a two-period market microstructure model with an exchange competition model with entry in which exchanges supply technological services, and have market power. We find that technological services can be strategic substitutes or complements in platform competition. Free entry of platforms delivers a superior outcome in terms of liquidity and (generally) welfare compared to the case of an unregulated monopoly. Controlling entry or, even better typically, platform fees may further increase welfare. The market may deliver excessive or insufficient entry. However, if the regulator is constrained to not making transfers to platforms then there is never insufficient entry.
Subjects: 
market fragmentation
welfare
endogenous market structure
platform competition
Cournot with free entry
industrial organization of exchanges
JEL: 
G10
G12
G14
Document Type: 
Working Paper
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