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MIDDLEMEN IN SEARCH EQUILIBRIUM *
Author(s) -
Masters Adrian
Publication year - 2007
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/j.1468-2354.2007.00428.x
Subject(s) - consumption (sociology) , economics , welfare , production (economics) , microeconomics , point (geometry) , scale (ratio) , baseline (sea) , returns to scale , process (computing) , industrial organization , market economy , computer science , mathematics , social science , oceanography , physics , geometry , quantum mechanics , sociology , geology , operating system
This article shows how allowing for goods to be divisible at the point of consumption and incorporating productive heterogeneity lead to the emergence of middlemen in an equilibrium search environment. In the baseline model, middlemen are welfare reducing and their number increases as market frictions are reduced. When the model is extended to allow for time taken in production and increasing returns to scale in the market meeting technology, middlemen can be beneficial to society by speeding up the meeting process.