Using U.S. NETS data, we present evidence that the positive trend observed in national productmarket concentration between 1990 and 2014 becomes a negative trend when we focus on measures of local concentration. We document diverging trends for several geographic definitions of local markets. SIC 8 industries with diverging trends are pervasive across sectors. In these industries, top firms have contributed to the amplification of both trends. When a top firm opens a plant, local concentration declines and remains lower for at least 7 years. Our findings, therefore, reconcile the increasing national role of large firms with falling local concentration, and a likely more competitive local environment.

At least one co-author has disclosed a financial relationship of potential relevance for this research. Further information is available online at http://www.nber.org/papers/w21931.ack NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

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A stepping stone arises in risky environments with learning and transferrable human capital. An example is the role played by academic two-year colleges in postsecondary education: Students, as they learn about the uncertain educational outcomes, can drop out or transfer up to harder and more rewarding schools, carrying a fraction of the accumulated human capital. A theory of education is built and contrasted empirically to find that (i) option value explains a large part of returns to enrollment, (ii) enrollment in academic two-year colleges is driven by the option to transfer up, and (iii) the value of the stepping stone is small.

Using U.S. NETS data, we present evidence that the positive trend observed in national productmarket concentration between 1990 and 2014 becomes a negative trend when we focus on measures of local concentration. We document diverging trends for several geographic definitions of local markets. SIC 8 industries with diverging trends are pervasive across sectors. In these industries, top firms have contributed to the amplification of both trends. When a top firm opens a plant, local concentration declines and remains lower for at least 7 years. Our findings, therefore, reconcile the increasing national role of large firms with falling local concentration, and a likely more competitive local environment.

We model asset issuance in over-the-counter markets. Investors buy newly issued assets in a primary market and trade existing assets in a secondary market, where both markets are over the counter. We show that the level of asset issuance and its efficiency depend on how investors split the surplus in secondary market trade. If buyers get most of the surplus in secondary market trade, then sellers do not have incentives to participate in the primary market in order to intermediate assets and the economy has a low level of assets. On the other hand, if sellers get most of the surplus, buyers have strong incentives to participate in the primary market and the economy has a high level of assets. Equilibrium is inefficient for any splitting rule. The result follows from a double-sided hold-up problem in which it is impossible for all investors to take into account the full social value of an asset when trading. We propose a tax/subsidy scheme and show how it restores efficiency. We calibrate our model to match features of the US municipal bond market in order to quantify the effects of the intervention.The intervention leads to large welfare gains and, in response to a financial crisis caused by an aggregate demand shock, makes the crisis less severe and shorter relative to the economy with no intervention. JEL Classification: D53, D82, G14

Relative price dispersion is defined as persistent differences in the price that retailers set for the same good relative to the price they set for their other goods. Using a large-scale dataset on prices in the US retail market, we document that relative price dispersion accounts for about 30% of the variance of prices for the same good, in the same market, during the same week. Using a search-theoretic model of the retail market, we show that relative price dispersion can be rationalized as the equilibrium consequence of a pricing strategy used by sellers to discriminate between high-valuation buyers who need to make all of their purchases in one store, and low-valuation buyers who are able to purchase different items in different stores.

We study the optimal anticipated policy in a pure-currency economy with flexible prices and a nondegenerate distribution of money holdings. The economy features a business cycle and lump-sum monetary injections have distributional effects that depend on the state of the cycle. We parsimoniously characterize the dynamics of the economy and study the optimal regulation of the money supply as a function of the state under commitment. The optimal policy prescribes monetary expansions in recessions, when insurance is most needed by the cash-poor unproductive agents. Conversely, the optimal policy prescribes monetary contractions during booms, so that the inflationary effect of the occasional expansions is undone.