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Measuring the Welfare of Intermediaries in Vertical Markets

Javier Donna, Pedro Pereira, Tiago Pires and Andre Trindade

MPRA Paper from University Library of Munich, Germany

Abstract: We empirically investigate the welfare of intermediaries in oligopolistic markets, where intermediaries offer additional services. We exploit the unique circumstance that, in our empirical setting, consumers can purchase from manufacturers or intermediaries. We specify an equilibrium model, and estimate it using product-level data. The demand includes consumers with costly search and channel-specific preferences. The supply includes two distribution channels. One features bargaining about wholesale prices between manufacturers and intermediaries, and price competition among intermediaries. The other is vertically integrated. The model is used to simulate counterfactuals, where intermediaries do not offer additional services. We find that intermediaries increase welfare.

Keywords: Intermediaries; vertical markets; search frictions; bargaining; outdoor advertising (search for similar items in EconPapers)
JEL-codes: D83 L42 L81 M37 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com
Date: 2018-12-10
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https://mpra.ub.uni-muenchen.de/90485/1/MPRA_paper_90485.pdf revised version (application/pdf)

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