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Competition among Middlemen When Buyers and Sellers Can Trade Directly

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  • Fingleton, John
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    Abstract

    This paper examines competition among middlemen when sellers and buyers can trade directly. Direct trade alters the supply and demand facing the middlemen, making them interdependent, and reduces the market power of intermediaries. However, it does not alter the result of Dale O. Stahl (1988) that middlemen may have an incentive to 'corner' the market if demand is inelastic. The model is applied to market making in financial markets, vertical integration in goods markets, and to the question of bypass in utilities. This discussion suggests that cornering is most likely in markets for essential inputs and that it may enable seller collusion. Copyright 1997 by Blackwell Publishing Ltd

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Journal of Industrial Economics.

    Volume (Year): 45 (1997)
    Issue (Month): 4 (December)
    Pages: 405-27

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    Handle: RePEc:bla:jindec:v:45:y:1997:i:4:p:405-27

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    Cited by:
    1. Andrea Galeotti & Jose Luis Moraga-Gonzalez, 2008. "Platform Intermediation in a Market for Differentiated Products," Tinbergen Institute Discussion Papers 08-020/1, Tinbergen Institute.
    2. De Fraja, Gianni & Sákovics, József, 2010. "Exclusive Nightclubs and Lonely Hearts Columns: Nonmonotone Participation in Optional Intermediation," SIRE Discussion Papers 2010-84, Scottish Institute for Research in Economics (SIRE).
    3. Domenico Colucci & Vincenzo Valori, 2006. "Asset price dynamics when behavioural heterogeneity varies," Working Papers - Mathematical Economics 2006-01, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    4. Simon Loertscher, 2005. "Market making oligopoly," Diskussionsschriften dp0512, Universitaet Bern, Departement Volkswirtschaft.
    5. Clerides, Sofronis & Nearchou, Paris & Pashardes, Panos, 2008. "Intermediaries as quality assessors: Tour operators in the travel industry," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 372-392, January.
    6. Sofronis Clerides & Paris Nearchou & Panos Pashardes, 2004. "Intermediaries as Quality Assessors in Markets with Asymmetric," University of Cyprus Working Papers in Economics 3-2004, University of Cyprus Department of Economics.
    7. Clerides, Sofronis & Nearchou, Paris & Pashardes, Panos, 2005. "Intermediaries as Bundlers, Traders and Quality Assessors: The Case of UK Tour Operators," CEPR Discussion Papers 5038, C.E.P.R. Discussion Papers.

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