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Search Intermediaries

  • Xianwen Shi
  • Aloysius Siow

In frictional matching markets with heterogeneous buyers and sellers, sellers incur discrete showing costs to show goods to buyers who incur discrete inspection costs to assess the suitability of the goods on offer. This paper studies how brokers can help reduce these costs by managing the level and mix of goods in their inventory. We find that intermediaries emerge and improve social welfare when there is sufficient heterogeneity in the types of goods and preferences. Our analysis highlights how learning and inventory management enable search intermediaries to internalize information externalities generated in unintermediated private search.

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File URL: http://www.economics.utoronto.ca/public/workingPapers/tecipa-426.pdf
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Paper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-426.

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Length: 26 pages
Date of creation: 05 Apr 2011
Date of revision:
Handle: RePEc:tor:tecipa:tecipa-426
Contact details of provider: Postal: 150 St. George Street, Toronto, Ontario
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  1. repec:cup:cbooks:9780521736602 is not listed on IDEAS
  2. Alok Johri & Lohn Leach, 2000. "Middlemen and the Allocation of Heterogeneous Goods," Department of Economics Working Papers 2000-06, McMaster University.
  3. Gabriele Camera & Alain Delacroix, 2004. "Trade Mechanism Selection in Markets with Frictions," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(4), pages 851-868, October.
  4. Burdett, Ken & Coles, Melvyn G, 1997. "Marriage and Class," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 141-68, February.
  5. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 1998. "Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 151-170, Summer.
  6. Alp Atakan, 2005. "Assortative Matching with Explicit Search Costs," 2005 Meeting Papers 218, Society for Economic Dynamics.
  7. James Albrecht & Axel Anderson & Eric Smith & Susan Vroman, 2007. "Opportunistic Matching In The Housing Market," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(2), pages 641-664, 05.
  8. Yavas, Abdullah, 1992. "Marketmakers versus matchmakers," Journal of Financial Intermediation, Elsevier, vol. 2(1), pages 33-58, March.
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