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Buyers, Sellers and Middlemen: Variations on Search-Theoretic Themes

  • Yuet-Yee Wong

    (Binghamton University)

  • Randall Wright

    (University of Wisconsin - Madison)

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    We study bilateral exchange, both direct trade, and indirect trade that happens through chains of intermediaries, or middlemen. We develop a model of this activity and present a sequence of applications. We illustrate how, and how many, intermediaries get involved, and how the terms of trade are determined. We discuss the roles of buyers and sellers in bilateral exchange, and how to interpret prices. We develop a particular bargaining solution and discuss how it relates to other solutions. We also illustrate how bubbles can emerge in the value of inventories.

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    File URL: https://economicdynamics.org/meetpapers/2011/paper_374.pdf
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    Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 374.

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    Date of creation: 2011
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    Handle: RePEc:red:sed011:374
    Contact details of provider: Postal:
    Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

    Web page: http://www.EconomicDynamics.org/
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    1. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-54, August.
    2. Gehrig, Thomas, 1993. "Intermediation in Search Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 2(1), pages 97-120, Spring.
    3. Ricardo Lagos & Randall Wright, 2005. "A Unified Framework for Monetary Theory and Policy Analysis," Journal of Political Economy, University of Chicago Press, vol. 113(3), pages 463-484, June.
    4. Pierre-Olivier Weill & Guillaume Rocheteau & Ricardo Lagos, 2010. "Crises and Liquidity in Over-the-counter Markets," 2010 Meeting Papers 500, Society for Economic Dynamics.
    5. Rubinstein, Ariel & Wolinsky, Asher, 1985. "Equilibrium in a Market with Sequential Bargaining," Econometrica, Econometric Society, vol. 53(5), pages 1133-50, September.
    6. Makoto Watanabe, 2012. "Middlemen: A Directed Search Equilibrium Approach," Tinbergen Institute Discussion Papers 12-138/V, Tinbergen Institute.
    7. Yavas, Abdullah, 1992. "Marketmakers versus matchmakers," Journal of Financial Intermediation, Elsevier, vol. 2(1), pages 33-58, March.
    8. Douglas Gale, 2010. "Limit theorems for markets with sequential bargaining," Levine's Working Paper Archive 621, David K. Levine.
    9. Watanabe, Makoto, 2010. "A model of merchants," Journal of Economic Theory, Elsevier, vol. 145(5), pages 1865-1889, September.
    10. Jianjun Miao, 2005. "A Search Model of Centralzied and Decentralized Trade," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-144, Boston University - Department of Economics.
    11. Narayana R. Kocherlakota, 1996. "Money is memory," Staff Report 218, Federal Reserve Bank of Minneapolis.
    12. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
    13. Alok Johri & John Leach, 2002. "Middlemen and the Allocation of Heterogeneous Goods," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 347-362, May.
    14. Li, Yiting, 1998. "Middlemen and private information," Journal of Monetary Economics, Elsevier, vol. 42(1), pages 131-159, June.
    15. Kalai, Ehud, 1977. "Proportional Solutions to Bargaining Situations: Interpersonal Utility Comparisons," Econometrica, Econometric Society, vol. 45(7), pages 1623-30, October.
    16. Kiyotaki, Nobuhiro & Wright, Randall, 1993. "A Search-Theoretic Approach to Monetary Economics," American Economic Review, American Economic Association, vol. 83(1), pages 63-77, March.
    17. Shouyong Shi, 1995. "Money and Prices: A Model of Search and Bargaining," Working Papers 916, Queen's University, Department of Economics.
    18. Kalai, Ehud & Postlewaite, Andrew & Roberts, John, 1978. "Barriers to trade and disadvantageous middlemen: Nonmonotonicity of the core," Journal of Economic Theory, Elsevier, vol. 19(1), pages 200-209, October.
    19. Gerard R. Butters, 1977. "Equilibrium Distributions of Sales and Advertising Prices," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 465-491.
    20. Abdullah Yavaş, 1996. "Search and Trading in Intermediated Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 5(2), pages 195-216, 06.
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