City Research Online

Exchange Competition, Entry, and Welfare

Cespa, G. ORCID: 0000-0003-2466-6168 & Vives, X. (2021). Exchange Competition, Entry, and Welfare. The Review of Financial Studies, doi: 10.1093/rfs/hhab101


We assess the consequences for market quality and welfare of different entry regimes and exchange pricing policies, integrating a microstructure modelwith a free-entry, exchange competition model where exchanges have marketpower in technological services. Free-entry delivers superior liquidity and welfare outcomes vis-`a-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.

Publication Type: Article
Additional Information: This is a pre-copyedited, author-produced version of an article accepted for publication in Review of Financial Studies following peer review. The version of record is available online at:
Publisher Keywords: Market Fragmentation, Welfare, Endogenous Market Structure, Platform Competition, Cournot with Free Entry, Industrial Organization of Exchanges
Subjects: H Social Sciences > HG Finance
Departments: Bayes Business School > Finance
[img] Text - Accepted Version
This document is not freely accessible until 30 September 2023 due to copyright restrictions.

To request a copy, please use the button below.

Request a copy



Downloads per month over past year

View more statistics

Actions (login required)

Admin Login Admin Login