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Intermediation in markets for goods and markets for assets

Ed Nosal, Yuet-Yee Wong and Randall Wright

Journal of Economic Theory, 2019, vol. 183, issue C, 876-906

Abstract: We analyze agents' decisions to act as producers or intermediaries using equilibrium search theory. Extending previous analyses in various ways, we ask when intermediation emerges and study its efficiency. In one version of the framework, meant to resemble retail, middlemen hold goods, which entails (storage) costs; that model always displays uniqueness and simple transition dynamics. In another version, middlemen hold assets, which entails negative costs, i.e., positive returns; that model can have multiple equilibria and complicated belief-based dynamics. These results are consistent with the venerable view that intermediation in financial markets is more prone to instability than in goods markets.

Keywords: Middlemen; Intermediation; Search; Bargaining; Multiplicity (search for similar items in EconPapers)
JEL-codes: D83 G24 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:183:y:2019:i:c:p:876-906

DOI: 10.1016/j.jet.2019.07.001

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