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Competition between Intermediated and Direct Trade and the Timing of Disintermediation

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  • Fingleton, John

Abstract

This paper analyses competition between direct and intermediated trade. We show that middlemen’s supply and demand depend on both their bid and ask prices if sellers and buyers have the alternative of trading directly. Multiplicity also prevails. Direct trade does not constrain the market power of middlemen unless it is frictionless. Our results suggest that the timing of disintermediation is likely to be sub-optimal and have implications, more generally, for the analysis of many financial and food markets, where parallel or alternative trade channels for the same good exist.

Suggested Citation

  • Fingleton, John, 1996. "Competition between Intermediated and Direct Trade and the Timing of Disintermediation," CEPR Discussion Papers 1539, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1539
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    More about this item

    Keywords

    Disintermediation; Intermediation; Middleman;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other

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