Economics, Econometrics and Finance
4 years ago

Regulations boosting market competition may harm efficiency and consumer welfare.

Finance and Economics Discussion Series
Dealers' Insurance, Market Structure, And Liquidity
Francesca Carapella, Cyril Monnet

Paper Summary

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The article explores how regulations in financial markets can sometimes lead to inefficiencies. By trying to improve market outcomes, regulations can actually hurt more efficient market participants and reduce incentives for everyone to invest in efficient technologies. This can result in higher competition, lower profits, and ultimately a cost to society. Some market participants resist certain regulations because they may not always be beneficial as they seem.