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Buyers, Sellers and Middlemen: Variations on Search-Theoretic Themes

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  • Yuet-Yee Wong
  • Randall Wright

Abstract

We study bilateral exchange, both direct trade and indirect trade that happens through chains of intermediaries or middlemen. We develop a model of this activity and present applications. This illustrates how, and how many, intermediaries get involved, and how the terms of trade are determined. We show how bargaining with one intermediary depends on upcoming negotiations with downstream intermediaries, leading to holdup problems. We discuss the roles of buyers and sellers in bilateral exchanges, and how to interpret prices. We develop a particular bargaining solution and relate it to other solutions. In addition to contrasting our framework with other models of middlemen, we discuss the connection to different branches of search theory. We also illustrate how bubbles can emerge in intermediation.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17511.

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Date of creation: Oct 2011
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Handle: RePEc:nbr:nberwo:17511

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  1. Yavas, Abdullah, 1994. "Middlemen in Bilateral Search Markets," Journal of Labor Economics, University of Chicago Press, vol. 12(3), pages 406-29, July.
  2. Junjian Miao, . "A search model of centralized and decentralized trade," Boston University - Department of Economics - Macroeconomics Working Papers Series WP2005-012, Boston University - Department of Economics, revised Oct 2005.
  3. Gabriele Camera, 2001. "Search, Dealers, and the Terms of Trade," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(3), pages 680-694, July.
  4. Pierre-Olivier Weill, 2007. "Leaning Against the Wind," Review of Economic Studies, Oxford University Press, vol. 74(4), pages 1329-1354.
  5. Gale, Douglas, 1987. "Limit theorems for markets with sequential bargaining," Journal of Economic Theory, Elsevier, vol. 43(1), pages 20-54, October.
  6. Geoffroy de Clippel & Kfir Eliaz, 2011. "On the Strategic Disclosure of Feasible Options in Bargaining," Working Papers 2011-5, Brown University, Department of Economics.
  7. Masters, Adrian, 2008. "Unpleasant middlemen," Journal of Economic Behavior & Organization, Elsevier, vol. 68(1), pages 73-86, October.
  8. Makoto Watanabe, 2012. "Middlemen: A Directed Search Equilibrium Approach," Tinbergen Institute Discussion Papers 12-138/V, Tinbergen Institute.
  9. Ricardo Lagos & Guillaume Rocheteau & Pierre-Olivier Weill, 2009. "Crises and Liquidity in Over-the-Counter Markets," NBER Working Papers 15414, National Bureau of Economic Research, Inc.
  10. Adrian Masters, 2007. "Middlemen In Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(1), pages 343-362, 02.
  11. Thomas Gehrig, 1993. "Intermediation in Search Markets," Discussion Papers 1058, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  12. Abdullah Yavaş, 1996. "Search and Trading in Intermediated Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 5(2), pages 195-216, 06.
  13. Benjamin Lester & Andrew Postlewaite & Randall Wright, 2008. "Information, Liquidity and Asset Prices," PIER Working Paper Archive 08-039, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  14. Gautam Bose & Abhijit Sengupta, 2010. "A Dynamic Model of Search and Intermediation," Discussion Papers 2010-04, School of Economics, The University of New South Wales.
  15. Yavas, Abdullah, 1992. "Marketmakers versus matchmakers," Journal of Financial Intermediation, Elsevier, vol. 2(1), pages 33-58, March.
  16. Patrick Bayer & Christopher Geissler & James W. Roberts, 2011. "Speculators and Middlemen: The Role of Intermediaries in the Housing Market," NBER Working Papers 16784, National Bureau of Economic Research, Inc.
  17. Alok Johri & Lohn Leach, 2000. "Middlemen and the Allocation of Heterogeneous Goods," Department of Economics Working Papers 2000-06, McMaster University.
  18. Watanabe, Makoto, 2010. "A model of merchants," Journal of Economic Theory, Elsevier, vol. 145(5), pages 1865-1889, September.
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Buyers, Sellers and Middlemen: Variations on Search-Theoretic Themes
    by Christian Zimmermann in NEP-DGE blog on 2011-11-07 21:30:44
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  1. repec:dgr:uvatin:2012138 is not listed on IDEAS
  2. Makoto Watanabe, 2012. "Middlemen: A Directed Search Equilibrium Approach," Tinbergen Institute Discussion Papers 12-138/V, Tinbergen Institute.

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