Identifying Cross-Sided Liquidity Externalities

: Two - Sided Markets with Negative Externalities

This paper analyses a two-sidedmarket in which two platforms compete against each other. One side, the advertisers, exerts a negative externality on the other side, the users. It is shown that if platforms can charge advertisers only, a higher degree of competition for users can lead to higher profits because competition on the advertisers’ side is reduced. If platforms can charge users as well...

Liquidity Constraints, Fiscal Externalities and Optimal Tuition Subsidies

Active Investment, Liquidity Externalities, and Markets for Information

Informed investors are a source of illiquidity, but those pursuing di¤erently informed strategies also generate quasi -noise trading. Quasi-noise trading creates non-monotonic externalities in information choice that shape the composition of active investment and that in‡uence investor herding, liquidity spirals, asset comovement, along with the information content of prices. These externalitie...

Liquidity Externalities and Adverse Selection: Evidence from Trading after Hours

This paper examines liquidity externalities by analyzing trading costs after hours. There is less than 1/20 as many trades per unit time after hours as during the trading day. The reduced trading activity results in substantially higher trading costs: quoted and effective spreads are three to four times larger than during the trading day. The higher spreads reflect greater adverse selection and...

Identifying Human-Capital Externalities: Theory with Applications

The identification of aggregate human-capital externalities is still not fully understood. The existing (Mincerian) approach confounds positive externalities with wage changes due to a downward sloping demand curve for human capital. As a result, the Mincerian approach yields positive externalities even when wages equal marginal social products. We propose an approach that identifies human-capi...