Working Paper: CEPR ID: DP16542
Authors: Alessandro Gavazza; Alessandro Lizzeri
Abstract: This is an invited chapter for the forthcoming Volume 4 of the Handbook of Industrial Organization. We focus on markets with frictions, such as transaction costs, asymmetric information, search and matching frictions. We discuss how such frictions affect allocations, favor the emergence of intermediaries or dealers, and potentially create market power. Our focus is mostly on markets with many participants rather than on transactions that are bilateral or involve a small number of players.
Keywords: frictions; intermediaries; market power
JEL Codes: L1; D83; D82; D23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Transaction Costs (D23) | Efficient Trade (F19) |
| Transaction Costs (D23) | Suboptimal Allocations of Durable Goods (L68) |
| Transaction Costs (D23) | Volume of Trade (F10) |
| Asymmetric Information (D82) | Barriers to Trade (F14) |
| Asymmetric Information (D82) | Adverse Selection (D82) |
| Adverse Selection (D82) | Market Inefficiency (G14) |
| Intermediaries (L14) | Facilitate Trade (F10) |
| Intermediaries (L14) | Improve Market Outcomes (D47) |