Competition and the cost of capital revisited: Special authorities and underwriters in the market for tax-exempt hospital bonds

We explore the effects of two kinds of competition on the cost of capital i n the tax-exempt bond marker: (Ii competition among underwriters and (2) co mpetition among issuers (mostly quasi-government special authorities). The first kind of competition-competitive versus negotiated bidding processes-h as received considerable previous attention. The second kind of competition has received for less attention and is related to the level of decentraliz ation of the market for issuing bonds. Using a national database covering 1 4 years, we find that both kinds of competition lower interest rates, at le ast in the hospital sector.