Department of Economics
Binghamton, NY 13902
Institutional Affiliation: Binghamton University
Information about this author at RePEc
NBER Working Papers and Publications
|October 2011||Buyers, Sellers and Middlemen: Variations on Search-Theoretic Themes|
with Randall Wright: w17511
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 applications. This illustrates how, and how many, intermediaries get involved, and how the terms of trade are determined. We show how bargaining with one intermediary depends on upcoming negotiations with downstream intermediaries, leading to holdup problems. We discuss the roles of buyers and sellers in bilateral exchanges, and how to interpret prices. We develop a particular bargaining solution and relate it to other solutions. In addition to contrasting our framework with other models of middlemen, we discuss the connection to different branches of search theory. We also illustrate how bubbles can emerge in intermed...