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We model a simple market setting in which fragmentation of trade of the same asset across multiple exchanges improves allocative efficiency. Fragmentation reduces the inhibiting effect of price-impact avoidance on order submission. Although fragmentation reduces market depth on each exchange, it also isolates cross-exchange price impacts, leading to more aggressive overall order submission and better rebalancing of unwanted positions across traders. Fragmentation also has implications for the extent to which prices reveal traders' private information. While a given exchange price is less informative in more fragmented markets, all exchange prices taken together are more informative. (JEL D47, D82, G14)

The debate on network neutrality concerns the ways in which Internet Service Providers (ISPs) can manage the traffic on their network, as gatekeepers of information between content providers and end-users on the Internet. The European institutions have chosen not to regulate network management by ISPs strictly, but rather have them make their network management transparent for end-users. Some Member States, however, are in the process of regulating network management beyond the transparency approach of the European framework, for instance by banning ISPs from blocking or degrading traffic on their networks. Such different regulatory approaches towards network management across borders lead to regulatory fragmentation that causes inefficiencies and threatens the Internal Market. The present research establishes the necessity for the European Institutions to counteract this regulatory fragmentation, and re-harmonize network management regulation across the EU. The core of this article then investigates whether EU law allows for such a re-harmonization effort and analyses two non-exclusive approaches to mitigate regulatory fragmentation of network management. First, the European Commission could open infringement proceedings against defecting Member States and argue that their national regulation encroaches on the independence of National Regulatory Authorities (NRAs). Second, the European Institutions could initiate harmonizing legislation following the Article 114 TFEU procedure-which will likely be upheld when challenged before the European Courts.

This paper analyses the relationship between domestic market fragmentation and economic performance at the sub-national level within China. Market segmentation means that goods, services and factors of production -capital and labour- are not easily mobile across different regions. China's political and economic structure is described as de facto federalism. It is traditionally based on a decentralized regional planning where provinces can be considered as autonomous economic actors that govern most economic activities and have huge regulatory, economic and financial powers in hands. The paper follows a two-step procedure. First, it estimates a province-level indicator of market fragmentation based on a price-based approach. Specifically we focus on observed deviations from the Law of One Price for a set of homogeneous agricultural products. We argue that inter-regional price volatility in integrated economies should not depend on the relative position of markets. We use a three-dimensional data set of monthly prices on 7 agricultural goods, between 1987 and 1997 across 170 cities of 28 provinces. We deem a province to be poorly integrated when inter-market price dispersion is greater for markets that lie on different side of its border than for markets that locate within the province, after distance is controlled for. Second, it then embeds this measure of market fragmentation into a cross-province growth framework, estimated with the GMM-system method. Results underline the economic importance of the Chinese provincial borders to be substantial as they are significant explanatory variables in accounting for observed deviations of the Law of One Price. Controlling for distance, markets on opposite sides of regional borders feature substantially higher differences in commodity prices than do cities on either side of the border. There is no evidence of declining trend in market segmentation between Chinese provinces. The evolution of the border effect over time is consistent with the changing fortunes of the reforms in China. Market integration does not seem to have much improved over the reform process at least until 1995. Our analysis of provincial growth dynamics underlines the favourable impact of market integration on economic performance and agricultural output. Our indicator of market fragmentation enters negatively in all regressions. Its coefficient is not only significant but also proves very robust to the inclusion of control variables such as inflation, trade openness and the importance of the non-public sector. The larger a province's border effect (thus the lower its economic integration with the rest of the country), the lower its economic growth. These findings prove the detrimental impact of market segmentation on growth in China. By extension, it underlines the counter-productive effect of protectionist policies adopted by provincial authorities along the reform course.