IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Exclusive nightclubs and lonely hearts columns: Non-monotone participation in optional intermediation

  • De Fraja, Gianni
  • Sákovics, József

In many decentralised markets, the traders who benefit most from an exchange do not employ intermediaries even though they could easily afford them. At the same time, employing intermediaries is not worthwhile for traders who benefit little from trade. Together, these decisions amount to non-monotone participation choices in intermediation: only traders of middle “type” employ intermediaries, while the rest, the high and the low types, prefer to search for a trading partner directly. We provide a theoretical foundation for this, hitherto unexplained, phenomenon. We build a dynamic matching model, where a trader's equilibrium bargaining share is a convex increasing function of her type. We also show that this is indeed a necessary condition for the existence of non-monotone equilibria.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/pii/S0167268112001758
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 84 (2012)
Issue (Month): 2 ()
Pages: 618-632

as
in new window

Handle: RePEc:eee:jeborg:v:84:y:2012:i:2:p:618-632
DOI: 10.1016/j.jebo.2012.09.009
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Zumpano, Leonard V & Elder, Harold W & Baryla, Edward A, 1996. "Buying a House and the Decision to Use a Real Estate Broker," The Journal of Real Estate Finance and Economics, Springer, vol. 13(2), pages 169-81, September.
  2. Carlos Alós-Ferrer, 1998. "- Dynamical Systems With A Continuum Of Randomly Matched Agents," Working Papers. Serie AD 1998-08, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  3. Becker, Gary S, 1973. "A Theory of Marriage: Part I," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 813-46, July-Aug..
  4. BLOCH, Francis & RYDER, Harl, 1994. "Two-Sided Search, Marriages and Matchmakers," CORE Discussion Papers 1994028, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Jean-Charles Rochet & Jean Tirole, 2014. "Platform Competition in Two-Sided Markets," CPI Journal, Competition Policy International, vol. 10.
  6. Ettore Damiano & Hao Li, 2007. "Price discrimination and efficient matching," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 30(2), pages 243-263, February.
  7. Lones Smith, 2006. "The Marriage Model with Search Frictions," Journal of Political Economy, University of Chicago Press, vol. 114(6), pages 1124-1146, December.
  8. Mark Armstrong, 2006. "Competition in two‐sided markets," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 668-691, 09.
  9. Ludovic Renou, 2008. "Group formation and governance," Discussion Papers in Economics 08/15, Department of Economics, University of Leicester, revised Nov 2008.
  10. Shimer, R. & Smith, L., 1997. "Assortative Matching and Search," Working papers 97-2a, Massachusetts Institute of Technology (MIT), Department of Economics.
  11. Fingleton, John, 1997. "Competition among Middlemen When Buyers and Sellers Can Trade Directly," Journal of Industrial Economics, Wiley Blackwell, vol. 45(4), pages 405-27, December.
  12. Eugene Choo & Aloysius Siow, 2006. "Who Marries Whom and Why," Journal of Political Economy, University of Chicago Press, vol. 114(1), pages 175-201, February.
  13. Gunter J. Hitsch & Ali Hortaçsu & Dan Ariely, 2010. "Matching and Sorting in Online Dating," American Economic Review, American Economic Association, vol. 100(1), pages 130-63, March.
  14. Ettore Damiano & Hao Li, 2004. "Unraveling of Dynamic Sorting," Econometric Society 2004 Latin American Meetings 72, Econometric Society.
  15. Gabre-Madhin, Eleni Z., 2001. "The role of intermediaries in enhancing market efficiency in the Ethiopian grain market," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 25(2-3), September.
  16. Nick Feltovich & Richmond Harbaugh & Ted To, 2002. "Too Cool for School? Signalling and Countersignalling," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 630-649, Winter.
  17. Yavas, Abdullah, 1994. "Middlemen in Bilateral Search Markets," Journal of Labor Economics, University of Chicago Press, vol. 12(3), pages 406-29, July.
  18. Thomas Gehrig, 1993. "Intermediation in Search Markets," Discussion Papers 1058, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  19. Hui-wen Koo & Pei-yu Lo, 2004. "Sorting: The Function of Tea Middlemen in Taiwan during the Japanese Colonial Era," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 160(4), pages 607-, December.
  20. Damiano, Ettore & Li, Hao, 2005. "Competing Matchmaking," Microeconomics.ca working papers damiano-05-01-25-10-08-07, Vancouver School of Economics, revised 18 Oct 2005.
  21. 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.
  22. Hoppe, Heidrun C. & Moldovanu, Benny & Ozdenoren, Emre, 2007. "Coarse Matching and Price Discrimination," CEPR Discussion Papers 6041, C.E.P.R. Discussion Papers.
  23. Terrence Hendershott & Jie Zhang, 2006. "A Model of Direct and Intermediated Sales," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(2), pages 279-316, 06.
  24. Caillaud, Bernard & Jullien, Bruno, 2003. " Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-28, Summer.
  25. R. Preston McAfee, 2002. "Coarse Matching," Econometrica, Econometric Society, vol. 70(5), pages 2025-2034, September.
  26. Gabre-Madhin, Eleni Z., 2001. "The role of intermediaries in enhancing market efficiency in the Ethiopian grain market," Agricultural Economics, Blackwell, vol. 25(2-3), pages 311-320, September.
  27. Gregg, Paul & Wadsworth, Jonathan, 1996. "How Effective Are State Employment Agencies? Jobcentre Use and Job Matching in Britain," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(3), pages 443-67, August.
  28. Nadia Burani, 2008. "Matching, search and intermediation with two-sided heterogeneity," Review of Economic Design, Springer;Society for Economic Design, vol. 12(2), pages 75-117, June.
  29. Ettore Damiano & Hao Li & Wing Suen, 2005. "Unravelling of Dynamic Sorting," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 1057-1076.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:84:y:2012:i:2:p:618-632. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.