Information externalities and intermediaries in frictional search markets

Xianwen Shi and Aloysius Siow ()

Canadian Journal of Economics, 2014, vol. 47, issue 4, 1131-1152

Abstract: In frictional matching markets with heterogeneous buyers and sellers, sellers incur discrete showing costs to show goods to buyers who incur discrete inspection costs to assess the suitability of the goods on offer. We study how brokers can help reduce these costs by managing the level and mix of goods in their inventory. Intermediaries emerge and improve social welfare when there is sufficient heterogeneity in the types of goods and preferences. Learning and inventory management enable search intermediaries to internalize information externalities generated in unintermediated private search.

Date: 2014
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Related works:
Journal Article: Information externalities and intermediaries in frictional search markets (2014)
Working Paper: Information Externalities and Intermediaries in Frictional Search Markets (2013)
Working Paper: Information Externalities and Intermediaries in Frictional Search Markets (2010)
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