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Marketmaking Middlemen

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  • Pieter Gautier
  • Bo Hu
  • Makoto Watanabe

Abstract

This article develops a model in which market structure is determined endogenously by the choice of intermediation mode. There are two representative modes of intermediation that are widely used in real‐life markets: one is a middleman mode where an intermediary purchases inventory from the wholesale market and resells to buyers; the other is a market‐making mode where an intermediary offers a platform for buyers and sellers to meet and trade. We show that a marketmaking middleman, who adopts a mixture of these two intermediation modes, can emerge in a directed search equilibrium and discuss implications for the market structure.

Suggested Citation

  • Pieter Gautier & Bo Hu & Makoto Watanabe, 2023. "Marketmaking Middlemen," RAND Journal of Economics, RAND Corporation, vol. 54(1), pages 83-103, March.
    • Handle: RePEc:bla:randje:v:54:y:2023:i:1:p:83-103
    DOI: 10.1111/1756-2171.12431
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    1. Marketmaking Middlemen
      by Christian Zimmermann in NEP-DGE blog on 2016-08-30 20:15:33

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    1. Yu Awaya & Kohei Iwasaki & Makoto Watanabe, 2024. "Money Is the Root of Asset Bubbles," CESifo Working Paper Series 10923, CESifo.

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    More about this item

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • G2 - Financial Economics - - Financial Institutions and Services
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L8 - Industrial Organization - - Industry Studies: Services
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics

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