Middlemen: A Directed Search Equilibrium Approach

Makoto Watanabe

No 12-138/V, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This paper studies an intermediated market operated by middlemen with high inventory holdings. I present a directed search model in which middlemen are less likely to experience a stockout because they have the advantage of inventory capacity, relative to other sellers. The model explains why popular items are sold at a larger premium, and everyday items at a larger discount, by large-scaled intermediaries. The concentration of middlemen's market, i.e., few middlemen, each with large capacity, can lead to a higher matching efficiency, but with a lower total welfare, compared to having many middlemen, each with small capacity.

Keywords: Directed Search; Intermediation; Inventory holdings (search for similar items in EconPapers)
JEL-codes: D4 F1 G2 L1 L8 R1 (search for similar items in EconPapers)
Date: 2012-12-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Journal Article: Middlemen: A Directed Search Equilibrium Approach (2020)
Journal Article: Middlemen: A Directed Search Equilibrium Approach (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20120138

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