BUYERS, SELLERS, AND MIDDLEMEN: VARIATIONS ON SEARCH‐THEORETIC THEMES

Randall Wright · Yuet‐Yee Wong

59 citations0/0 files storedInternational Economic Review

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Abstract

We study exchange that is bilateral but indirect—it involves chains of intermediaries, or middlemen—in markets with frictions. These frictions include search and bargaining problems. We show how, and how many, intermediaries might get involved in a chain, and how bargaining with one depends on upcoming negotiations with those downstream. The roles of buyers, sellers, money, and prices are discussed, allowing us to clarify some neglected connections between different branches of search theory. Pursuing one such connection, with monetary economics, we show how bubbles can emerge in intermediation, even with fully rational agents and perfect foresight.

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References

1950The Bargaining Problem 1985Bid, ask and transaction prices in a specialist market with heterogeneously informed traders 1994Job Creation and Job Destruction in the Theory of Unemployment 1986The Nash Bargaining Solution in Economic Modelling 2003Chicken & Egg: Competition among Intermediation Service Providers 2005A Unified Framework for Monetary Theory and Policy Analysis 1989On Money as a Medium of Exchange 1983Equilibrium Price Dispersion

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2017Intermediation as Rent Extraction 2018Middlemen: the good, the bad, and the ugly

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