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Competition among Middlemen When Buyers and Sellers Can Trade Directly


  • Fingleton, John


This paper examines competition among middlemen when sellers and buyers can trade directly. Direct trade alters the supply and demand facing the middlemen, making them interdependent, and reduces the market power of intermediaries. However, it does not alter the result of Dale O. Stahl (1988) that middlemen may have an incentive to 'corner' the market if demand is inelastic. The model is applied to market making in financial markets, vertical integration in goods markets, and to the question of bypass in utilities. This discussion suggests that cornering is most likely in markets for essential inputs and that it may enable seller collusion. Copyright 1997 by Blackwell Publishing Ltd

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  • Fingleton, John, 1997. "Competition among Middlemen When Buyers and Sellers Can Trade Directly," Journal of Industrial Economics, Wiley Blackwell, vol. 45(4), pages 405-427, December.
  • Handle: RePEc:bla:jindec:v:45:y:1997:i:4:p:405-27

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    References listed on IDEAS

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    Cited by:

    1. Clerides, Sofronis & Nearchou, Paris & Pashardes, Panos, 2008. "Intermediaries as quality assessors: Tour operators in the travel industry," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 372-392, January.
    2. Gautier, Pieter A. & Hu, Bo & Watanabe, Makoto, 2016. "Marketmaking Middlemen," IZA Discussion Papers 10152, Institute for the Study of Labor (IZA).
    3. Galeotti, Andrea & Moraga-González, José Luis, 2009. "Platform intermediation in a market for differentiated products," European Economic Review, Elsevier, vol. 53(4), pages 417-428, May.
    4. Polanski Arnold & Cardona Daniel, 2012. "Multilevel Mediation in Symmetric Trees," Review of Network Economics, De Gruyter, vol. 11(3), pages 1-23, September.
    5. De Fraja, Gianni & Sákovics, József, 2012. "Exclusive nightclubs and lonely hearts columns: Non-monotone participation in optional intermediation," Journal of Economic Behavior & Organization, Elsevier, vol. 84(2), pages 618-632.
    6. Domenico Colucci & Vincenzo Valori, 2008. "Asset Price Dynamics When Behavioural Heterogeneity Varies," Computational Economics, Springer;Society for Computational Economics, vol. 32(1), pages 3-20, September.
    7. Simon Loertscher, 2005. "Market making oligopoly," Diskussionsschriften dp0512, Universitaet Bern, Departement Volkswirtschaft.
    8. Tara Mitchell, 2014. "Is Knowledge Power? Competition and Information in Agricultural Markets," The Institute for International Integration Studies Discussion Paper Series iiisdp456, IIIS.
    9. Clerides, Sofronis & Nearchou, Paris & Pashardes, Panos, 2005. "Intermediaries as Bundlers, Traders and Quality Assessors: The Case of UK Tour Operators," CEPR Discussion Papers 5038, C.E.P.R. Discussion Papers.
    10. Sofronis Clerides & Paris Nearchou & Panos Pashardes, 2004. "Intermediaries as Quality Assessors in Markets with Asymmetric," University of Cyprus Working Papers in Economics 3-2004, University of Cyprus Department of Economics.

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