Abstract We study a model of over-the-counter trading in which ex ante identical traders invest contact technology and participate bilateral trade. show that rich market structure emerges both equilibrium an optimal allocation. There is continuous heterogeneity access under weak regularity conditions. If the cost per constant, governed by power law there are middlemen, participants with unbound...

Eric K. Clemens Robert A. Schwartz Bruce W. Weber Department of Operations and Department of Finance Department of Information Systems Information Management Baruch College School of Business Stern School of Business The Wharton School 17 Lexington Avenue Management Education Center 9-71 University of Pennsylvania BOX E-0621 New York University Philadelphia, PA 19104-6366 New York, NY 1OO1O New...

1. Introduction Why are some industries dominated worldwide by a handful of firms? Why is the size distribution of firms within most industries highly skewed? Questions of this kind have attracted continued interest among economists for over half a century. One reason for abiding interest in such questions of 'market structure' is that this is one of the few areas in economics where we encounte...