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Bid-ask spreads with indirect competition among specialists

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  • Gehrig, Thomas
  • Jackson, Matthew

Abstract

Research Joint Ventures and subsidies are important R&D policy instruments. The regulator, however, is unlikely to know all the relevant information to regulate R&D optimally. The extent to which there are appropriability problems is one such variable that is private information to the firms within the industry. In a duopoly setting we analyze the characteristics of a first-best and second-best R&D policy where the government can either allow Research Joint Ventures or not and give lump-sum subisides to the parties involved. The second-best R&D policy improves upon the policy of an unsophisicated government by integrating reports of the firms on their spillovers and the correlation between the R&D spillovers of the firms into its formulation.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Financial Markets.

Volume (Year): 1 (1998)
Issue (Month): 1 (April)
Pages: 89-119

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Handle: RePEc:eee:finmar:v:1:y:1998:i:1:p:89-119

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Web page: http://www.elsevier.com/locate/finmar

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  1. Gehrig, Thomas, 1993. "Intermediation in Search Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 2(1), pages 97-120, Spring.
  2. Matthew O. Jackson & Sandro Brusco, 1997. "The Optimal Design of a Market," Discussion Papers 1186, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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  5. Madhavan, Ananth & Smidt, Seymour, 1993. " An Analysis of Changes in Specialist Inventories and Quotations," Journal of Finance, American Finance Association, vol. 48(5), pages 1595-1628, December.
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  8. Hagerty, Kathleen, 1991. "Equilibrium Bid-Ask Spreads in Markets with Multiple Assets," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 237-57, April.
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  16. Christie, William G & Schultz, Paul H, 1994. " Why Do NASDAQ Market Makers Avoid Odd-Eighth Quotes?," Journal of Finance, American Finance Association, vol. 49(5), pages 1813-40, December.
  17. Stahl, Konrad, 1982. "Differentiated Products, Consumer Search, and Locational Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 31(1-2), pages 97-113, September.
  18. Spence, Michael, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Wiley Blackwell, vol. 43(2), pages 217-35, June.
  19. Christie, William G & Harris, Jeffrey H & Schultz, Paul H, 1994. " Why Did NASDAQ Market Makers Stop Avoiding Odd-Eighth Quotes?," Journal of Finance, American Finance Association, vol. 49(5), pages 1841-60, December.
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Cited by:
  1. Sandro Brusco & Matthew O. Jackson, 1997. "The Optimal Design of a Market," Microeconomics 9711003, EconWPA.
  2. Goodfellow, Christiane & Schiereck, Dirk & Verrier, Tatjana, 2010. "Does screen trading weather the weather? A note on cloudy skies, liquidity, and computerized stock markets," International Review of Financial Analysis, Elsevier, vol. 19(2), pages 77-80, March.
  3. Corwin, Shane A., 2004. "Specialist performance and new listing allocations on the NYSE: an empirical analysis," Journal of Financial Markets, Elsevier, vol. 7(1), pages 27-51, January.
  4. Coughenour, Jay F. & Saad, Mohsen M., 2004. "Common market makers and commonality in liquidity," Journal of Financial Economics, Elsevier, vol. 73(1), pages 37-69, July.
  5. Madhavan, Ananth, 2000. "Market microstructure: A survey," Journal of Financial Markets, Elsevier, vol. 3(3), pages 205-258, August.
  6. Krause, Andreas, 2005. "Optimal stock allocation in specialist markets," Research in Economics, Elsevier, vol. 59(1), pages 23-39, March.

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