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Exclusive Nightclubs and Lonely Hearts Columns: Nonmonotone Participation in Optional Intermediation

Gianni De Fraja () and Sákovics, József
Authors registered in the RePEc Author Service: József Sákovics ()

No 2010-84, SIRE Discussion Papers from Scottish Institute for Research in Economics (SIRE)

Abstract: In many decentralised markets, the traders who benefit most from an exchange do not employ intermediaries even though they could easily afford them. At the same time, employing intermediaries is not worthwhile for traders who benefit little from trade. Together, these decisions amount to non-monotone participation choices in intermediation: only traders of middle type employ intermediaries, while the rest, the high and the low types, prefer to search for a trading partner directly. We provide a theoretical foundation for this, hitherto unexplained, phenomenon. We build a dynamic matching model, where a trader’s equilibrium bargaining share is a convex increasing function of her type. We also show that this is indeed a necessary condition for the existence of non-monotone equilibria.

Keywords: Two-sided markets; intermediation; dynamic matching (search for similar items in EconPapers)
Date: 2010
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Related works:
Journal Article: Exclusive nightclubs and lonely hearts columns: Non-monotone participation in optional intermediation (2012) Downloads
Working Paper: Exclusive Nightclubs and Lonely Hearts Columns: Non-monotone Participation in Optional Intermediation (2010) Downloads
Working Paper: Exclusive Nightclubs and Lonely Hearts Columns: Non-monotone Participation in Optional Intermediation (2010) Downloads
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