Market Microstructure and Incentives to Invest

Bibliographic Data

ID10170911
AuthorsDaniel F Spulber (0000-0003-2697-6522, corresponding author)
Year2002
Volume110
Issue2
Pages352-381
Publication date2002-04-01
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueJournal of Political Economy (JOURNAL)
Journal identifiersISSN: 0022-3808 • E-ISSN: 1537-534X
PublisherUniversity of Chicago Press (PUBLISHER • US)
DOI10.1086/338749
OpenAlexW2108576892
LanguageEN
Citations received3
References cited21

Market organization significantly affects total output and incentives for firms to invest. I compare three types of market organization. In a market with search and random matching, total output is excessive and there are incentives for inefficient underinvestment. In a market with a monopoly dealer, total output is insufficient and underinvestment also occurs. Competition between the search market and the dealer market improves incentives to invest, and competition between dealers yields efficient total output and investment. This suggests that additional entry of wholesalers and other interbusiness dealers should stimulate aggregate business investment

Business · Competition (biology · Economics · Factor market · Incentive · Industrial organization · Investment (military · Market economy · Matching (statistics · Microeconomics · Monetary economics · Monopoly · Subsidy · Auction Theory and Applications · Corporate Finance and Governance · Merger and Competition Analysis

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