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Search, Dealers, and the Terms of Trade

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  • Gabriele Camera

    (Purdue University)

Abstract

I study a search theoretic model with pairwise meetings where dealers arise endogenously. The extent of intermediation depends on its cost, trade frictions, and the dealers' ability to negociate favorable terms of trade. Under Nash bargaining, there is a unique equilibrium where dealers buy and hold the low-storage-cost good and, depending on their relative bargaining power, resell it at a premium or a discount. The distribution of the terms of trade is non-degenerate unless storage cost and frictions vanish. Due to an externality created by intermediation, the efficient allocation can be achieved only if dealers can charge a positive markup. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1006/redy.2001.0130
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 4 (2001)
Issue (Month): 3 (July)
Pages: 680-694

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Handle: RePEc:red:issued:v:4:y:2001:i:3:p:680-694

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Related research

Keywords: Search; Intermediation; Prices; Bargaining;

References

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  1. Jack Ochs & John Duffy, 1999. "Emergence of Money as a Medium of Exchange: An Experimental Study," American Economic Review, American Economic Association, American Economic Association, vol. 89(4), pages 847-877, September.
  2. Brown, Paul M., 1996. "Experimental evidence on money as a medium of exchange," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 20(4), pages 583-600, April.
  3. Marimon, Ramon & McGrattan, Ellen & Sargent, Thomas J., 1990. "Money as a medium of exchange in an economy with artificially intelligent agents," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 14(2), pages 329-373, May.
  4. Shi Shougong, 1995. "Money and Prices: A Model of Search and Bargaining," Journal of Economic Theory, Elsevier, Elsevier, vol. 67(2), pages 467-496, December.
  5. Kehoe, Timothy J & Kiyotaki, Nobuhiro & Wright, Randall, 1993. "More on Money as a Medium of Exchange," Economic Theory, Springer, Springer, vol. 3(2), pages 297-314, April.
  6. Camera, G. & Corbae, D., 1998. "Money and Price Dispersion," Working Papers, University of Iowa, Department of Economics 98-03, University of Iowa, Department of Economics.
  7. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(4), pages 927-54, August.
  8. Wright, Randall, 1995. "Search, evolution, and money," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 19(1-2), pages 181-206.
  9. Li, Yiting, 1998. "Middlemen and private information," Journal of Monetary Economics, Elsevier, Elsevier, vol. 42(1), pages 131-159, June.
  10. Yavas, Abdullah, 1994. "Middlemen in Bilateral Search Markets," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 12(3), pages 406-29, July.
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Cited by:
  1. Yuet-Yee Wong & Randall Wright, 2011. "Buyers, sellers and middlemen: variations in search theory," Working Papers, Federal Reserve Bank of Minneapolis 691, Federal Reserve Bank of Minneapolis.
  2. Yuet-Yee Wong & Randall Wright, 2011. "Buyers, Sellers and Middlemen: Variations on Search-Theoretic Themes," NBER Working Papers 17511, National Bureau of Economic Research, Inc.

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