Efficient Selection and Insider Contracting Groups: a Comment on the Yarbrough & Yarbrough Paper |
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Authors: | Sumner J. La Croix |
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Affiliation: | (1) Department of Economics, University of Hawaii, Honolulu, Hawaii, 96822, U.S.A;(2) Department of Economics, Barnard College, NY, NY, 10027 |
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Abstract: | Beth & Robert Yarbrough's paper reviews and augments an extensive literature analyzing how insider trading groups support the process of exchange. They argue that these groups efficiently adapt to changes in the transacting environment. Yarbrough & Yarbrough's argument is compelling for groups operating in a free and open civil society but not when competition among groups is impaired by barriers to entry and externalities. This article considers whether insider trading groups are able to reach a steady-state equilibrium and presents a number of historical and contemporary examples in which insider trading groups plant the seeds of their own destruction. |
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Keywords: | insider trading group ethnically homogeneous middlemen group civil society reputation group boundaries |
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