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Demand spillovers and market outcomes in the mutual fund industry

Gavazza, Alessandro (2011) Demand spillovers and market outcomes in the mutual fund industry. RAND Journal of Economics, 42 (4). pp. 776-804. ISSN 0741-6261

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Identification Number: 10.1111/j.1756-2171.2010.00154.x

Abstract

When consumers concentrate their purchases at a single firm, firms that offer more products than their rivals gain market share for all their products. These spillovers induce firms to offer a greater variety of products rather than lower prices, and a concentrated industry with few large firms can arise if spillovers are strong enough. This article presents a simple model that illustrates this mechanism explicitly. The empirical analysis documents strong demand spillovers in the retail segment of the U.S. mutual fund industry, in which fees are nontrivial, families offer many funds, and the market is quite concentrated. Instead, spillovers are weaker, fees are lower, families offer fewer funds, and the market structure is more fragmented in the institutional segment.

Item Type: Article
Official URL: http://onlinelibrary.wiley.com/journal/10.1111/%28...
Additional Information: © 2011 RAND
Divisions: Economics
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HF Commerce
JEL classification: D - Microeconomics > D1 - Household Behavior and Family Economics > D10 - General
G - Financial Economics > G2 - Financial Institutions and Services > G23 - Pension Funds; Other Private Financial Institutions
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
Sets: Departments > Economics
Date Deposited: 18 Feb 2014 15:56
Last Modified: 20 Feb 2019 10:00
URI: http://eprints.lse.ac.uk/id/eprint/55722

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