Equilibrium in a market with intermediation is Walrasian

Review of Economic Design, 1997, vol. 3, issue 1, pages 75-89

Abstract: We show that a profit maximizing monopolistic intermediary may behave approximately like a Walrasian auctioneer by setting bid and ask prices nearly equal to Walrasian equilibrium prices. In our model agents choose to trade either through the intermediary or privately. Buyers (sellers) trading through the intermediary potentially trade immediately at the ask (bid) price, but sacrifice the spread as gains. A buyer or seller who trades privately shares all the gains to trade with this trading partner, but risks costly delay in finding a partner. We show that as the cost of delay vanishes, the equilibrium bid and ask prices converge to the Walrasian equilibrium prices.

Keywords: Intermediation; bid; ask; matching; Walrasian equilibrium (search for similar items in EconPapers)
JEL-codes: C72 C78 L12 (search for similar items in EconPapers)
Date: 1997 Written 1997-11-27
Note: Received: 2 February 1996 / Accepted: 28 March 1997
View citations in EconPapers

Downloads: (external link)
http://link.springer.de/link/service/journals/10058/papers/7003001/70030075.pdf (application/pdf)
http://link.springer.de/link/service/journals/1005 ... 03001/70030075.ps.gz (application/postscript)
Access to the full text of the articles in this series is restricted

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Ordering information: This journal article can be ordered from
http://link.springer.de/orders.htm

Access Statistics for this article

Review of Economic Design is edited by Atila Abdulkadiroglu and Matthew O. Jackson

More articles in Review of Economic Design from Springer
Series data maintained by Christopher F Baum ().