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Article
Horizontally Differentiated Market Makers
Journal of Economics and Management Strategy (2007)
  • Simon Loertscher, University of Melbourne
Abstract
I analyze a model of competition between two market makers who are located at the opposite ends of the Hotelling line, both of which are also occupied by a search market. Buyers and sellers are uniformly distributed between the two market places, yet can only trade at one of them. In equilibrium, market makers net a positive pro¯t and trade with buyers and sellers close to them, while buyers and sellers further away participate in search markets. Interestingly, a duopolistic market maker nets a larger pro¯t than a monopoly because search markets make the quantities market makers trade strategic complements.
Publication Date
Winter 2007
Citation Information
Simon Loertscher. "Horizontally Differentiated Market Makers" Journal of Economics and Management Strategy Vol. 16 Iss. 4 (2007)
Available at: http://works.bepress.com/simon_loertscher/1/