Financial Industry Dynamics

33 Pages Posted: 28 Aug 2015

See all articles by Tim Landvoigt

Tim Landvoigt

University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Richard Lowery

University of Texas-Austin

Date Written: August 26, 2015

Abstract

We develop a dynamic model of entry, exit, and firm quality in the market for issuance and trading of complex financial securities. Firm quality has two dimensions; security production expertise, which creates a positive externality for other firms, and trading expertise, which allows firms to obtain more favorable prices when trading with other firms. We find that markets that have a greater scope for investment in trading expertise (information) also exhibit greater concentration, firm heterogeneity, fragility, and price dispersion.

Keywords: financial expertise, dynamic oligopoly

JEL Classification: G20,L13, L15

Suggested Citation

Landvoigt, Tim and Lowery, Richard, Financial Industry Dynamics (August 26, 2015). Available at SSRN: https://ssrn.com/abstract=2651946 or http://dx.doi.org/10.2139/ssrn.2651946

Tim Landvoigt

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Richard Lowery (Contact Author)

University of Texas-Austin ( email )

Red McCombs School of Business
Austin, TX 78712
United States

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