Premium
BUYERS, SELLERS, AND MIDDLEMEN: VARIATIONS ON SEARCH‐THEORETIC THEMES
Author(s) -
Wright Randall,
Wong YuetYee
Publication year - 2014
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12053
Subject(s) - intermediation , intermediary , negotiation , futures studies , economics , microeconomics , downstream (manufacturing) , search theory , financial intermediary , computer science , macroeconomics , finance , operations management , artificial intelligence , political science , law
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.