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Competition among Middlemen when Buyers and Sellers can Trade Directly


  • John Fingleton


This paper examines how the introduction of a direct trade alternative for buyers and sellers affects competition among middlemen. Direct trade makes the middlemen's supply and demand functions depend on both bid and ask prices, a feature we term interdependence. A simple model is used to illustrate this phenomenon and to show how interdependence effects depend on the efficiency of direct trade. We find that direct trade does not alter Stahl's (1988) finding that middlemen may "corner" the market. However, this occurs under different conditions and with smaller distortions if there is an active trade possibility for sellers and buyers.

Suggested Citation

  • John Fingleton, 1996. "Competition among Middlemen when Buyers and Sellers can Trade Directly," Economics Technical Papers 967, Trinity College Dublin, Department of Economics.
  • Handle: RePEc:tcd:tcduet:967

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    References listed on IDEAS

    1. Christopher A. Pissarides, 1994. "Search Unemployment with On-the-job Search," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 457-475.
    2. Paul Gregg & Jonathan Wadsworth, 1996. "Mind the Gap," CEP Discussion Papers dp0303, Centre for Economic Performance, LSE.
    3. Jan Rutkowski, 1996. "High skills pay off: the changing wage structure during economic transition in Poland," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 4(1), pages 89-112, May.
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    More about this item

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • G2 - Financial Economics - - Financial Institutions and Services


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