AbstractIn frictional matching markets with heterogeneous buyers and sellers, sellers incur discrete showing costs to show goods to buyers who incur discrete inspection costs to assess the suitability of the goods on offer. This paper studies how brokers can help reduce these costs by managing the level and mix of goods in their inventory. We find that intermediaries emerge and improve social welfare when there is sufficient heterogeneity in the types of goods and preferences. Our analysis highlights how learning and inventory management enable search intermediaries to internalize information externalities generated in unintermediated private search.
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Bibliographic InfoPaper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-426.
Length: 26 pages
Date of creation: 05 Apr 2011
Date of revision:
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Search; Intermediation; Brokers; Housing Markets;
Find related papers by JEL classification:
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-04-16 (All new papers)
- NEP-DGE-2011-04-16 (Dynamic General Equilibrium)
- NEP-URE-2011-04-16 (Urban & Real Estate Economics)
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