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A model of merchants

  • Watanabe, Makoto

I propose a simple model of merchants who are specialized in buying and selling a homogeneous good. Facing the same frictions as in the buyer-seller direct trades, merchants can make profits with an ability to buy and sell many units of the good. They set the price to compete in the market and provide buyers with a strong likelihood of obtaining the good. This paper establishes a turnover equilibrium where some agents choose to become merchants endogenously. An interesting multiplicity can emerge.

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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 145 (2010)
Issue (Month): 5 (September)
Pages: 1865-1889

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Handle: RePEc:eee:jetheo:v:145:y:2010:i:5:p:1865-1889
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  19. Spulber, Daniel F, 1996. "Market Making by Price-Setting Firms," Review of Economic Studies, Wiley Blackwell, vol. 63(4), pages 559-80, October.
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