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Spatial competition with intermediated matching

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  • Raalte, C.L.J.P. van
  • Webers, H.M.

    (Tilburg University, Faculty of Economics and Business Administration)

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    Abstract

    This paper analyzes the spatial competition in commission fees between two match makers. These match makers serve as middlemen between buyers and sellers who are located uniformly on a circle. The profits of the match makers are determined by their respective market sizes. A limited willingness to pay is incorporated by means of reservation prices. If the fraction of buyers and sellers is unequal, the match makers are willing to subsidize the short side of the market, while the long side is exploited completely, provided reservation prices are sufficiently high. Competition is then concentrated entirely on the short side. When reservation prices are low, two local monopolies will emerge.

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    Bibliographic Info

    Paper provided by Tilburg University, Faculty of Economics and Business Administration in its series Research Memorandum with number 702.

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    Date of creation: 1995
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    Handle: RePEc:dgr:kubrem:1995702

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    Web page: http://www.tilburguniversity.edu/nl/over-tilburg-university/schools/economics-and-management/

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    1. Paz Espinosa, Maria, 1992. "On the efficiency of location decisions under discriminatory pricing," International Journal of Industrial Organization, Elsevier, vol. 10(2), pages 273-296, June.
    2. Trejos, Alberto & Wright, Randall, 1995. "Search, Bargaining, Money, and Prices," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 118-41, February.
    3. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-54, August.
    4. Hamilton, Jonathan H & MacLeod, W Bentley & Thisse, Jacques-Francois, 1991. "Spatial Competition and the Core," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 925-37, August.
    5. Yavas Abdullah, 1995. "Can Brokerage Have an Equilibrium Selection Role?," Journal of Urban Economics, Elsevier, vol. 37(1), pages 17-37, January.
    6. Boyer, Marcel & Moreaux, Michel, 1993. "Strategic market coverage in spatial competition," International Journal of Industrial Organization, Elsevier, vol. 11(3), pages 299-326, September.
    7. Rubinstein, Ariel & Wolinsky, Asher, 1985. "Equilibrium in a Market with Sequential Bargaining," Econometrica, Econometric Society, vol. 53(5), pages 1133-50, September.
    8. Webers, H.M., 1994. "The location model with two periods of price competition," Discussion Paper 1994-68, Tilburg University, Center for Economic Research.
    9. Webers, H.M., 1995. "The generalized circular model," Research Memorandum 685, Tilburg University, Faculty of Economics and Business Administration.
    10. Bhattacharya, Utpal & Yavas, Abdullah, 1993. "In search of the right middleman," Economics Letters, Elsevier, vol. 42(4), pages 341-347.
    11. Webers, H.M., 1994. "The location model with two periods of price competition," Research Memorandum 663, Tilburg University, Faculty of Economics and Business Administration.
    12. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    13. Rubinstein, Ariel & Wolinsky, Asher, 1987. "Middlemen," The Quarterly Journal of Economics, MIT Press, vol. 102(3), pages 581-93, August.
    14. Yavas, Abdullah, 1992. "Marketmakers versus matchmakers," Journal of Financial Intermediation, Elsevier, vol. 2(1), pages 33-58, March.
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