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Beware the Winner's CurseVictories that Can Sink You and Your Company$
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G. Anandalingam and Henry C. Lucas

Print publication date: 2004

Print ISBN-13: 9780195177404

Published to Oxford Scholarship Online: September 2007

DOI: 10.1093/acprof:oso/9780195177404.001.0001

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Winners and losers in the securities industry

Winners and losers in the securities industry

Chapter:
(p.147) 7 Winners and losers in the securities industry
Source:
Beware the Winner's Curse
Author(s):

G. Anandalingam (Contributor Webpage)

Henry C. Lucas

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780195177404.003.0007

This chapter focuses on a major force in the economy, and one that is key to the capitalist system: securities markets and the brokerage industry. Although Nasdaq online securities market was one of the first movers in electronic markets, when Electronic Communications Networks (ECNs) came along and siphoned a considerable amount of trade away, Nasdaq, with its very survival in question, took a long time to respond to the threat. The chapter relates the story of how organizational factors made it difficult for the most successful broker, Merrill Lynch, to respond with a new price structure for trading stocks when electronic brokerages like Schwab and e-Trade came along. These examples illustrate a winner’s curse that comes from complacency and the psychological and organizational factors that often prevent a winner from responding to new events and challenges.

Keywords:   Nasdaq, ECN, NYSE, brokerage industry, electronic brokers, Merrill Lynch, Schwab, e-Trade

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