Buyers, Sellers and Middlemen: Variations on Search-Theoretic Themes

Linda Wong () and Randall Wright

No 17511, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study bilateral exchange, both direct trade and indirect trade that happens through chains of intermediaries or middlemen. We develop a model of this activity and present applications. This illustrates how, and how many, intermediaries get involved, and how the terms of trade are determined. We show how bargaining with one intermediary depends on upcoming negotiations with downstream intermediaries, leading to holdup problems. We discuss the roles of buyers and sellers in bilateral exchanges, and how to interpret prices. We develop a particular bargaining solution and relate it to other solutions. In addition to contrasting our framework with other models of middlemen, we discuss the connection to different branches of search theory. We also illustrate how bubbles can emerge in intermediation.

JEL-codes: D2 D4 D83 (search for similar items in EconPapers)
Date: 2011-10
New Economics Papers: this item is included in nep-cba, nep-cis, nep-dge and nep-int
Note: EFG IO
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published as Randall Wright & Yuet‐Yee Wong, 2014. "Buyers, Sellers, And Middlemen: Variations On Search‐Theoretic Themes," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(2), pages 375-397, May.

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Working Paper: Buyers, Sellers and Middlemen: Variations on Search-Theoretic Themes (2011)
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