Intermediation in networks

Jan-Peter Siedlarek ()
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Jan-Peter Siedlarek: Federal Reserve Bank of Cleveland

Economic Theory, 2025, vol. 79, issue 3, No 10, 1083-1105

Abstract: Abstract This paper studies decentralized trade in networked markets with intermediaries using a stochastic model of multilateral bargaining in which players compete on different routes through the network. The paper characterizes stationary equilibrium payoffs as the fixed point of a set of intuitive value function equations and studies efficiency and the impact of network structure on payoffs. In equilibrium players will never pass on an efficient trade opportunity, but they may trade in situations where delay would be efficient. With homogeneous surplus, the payoffs for players who are not essential to a trade opportunity go to zero if there is at least one essential player as trade frictions vanish.

Keywords: Intermediation; Over-the-counter markets; Financial networks; Stochastic games (search for similar items in EconPapers)
JEL-codes: C73 C78 L14 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s00199-024-01611-7

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