Intermediation in Networks

27 Pages Posted: 31 Jul 2012 Last revised: 5 Oct 2015

See all articles by Jan-Peter Siedlarek

Jan-Peter Siedlarek

Federal Reserve Banks - Federal Reserve Bank of Cleveland

FEEM RPS Submitter

affiliation not provided to SSRN

Multiple version iconThere are 2 versions of this paper

Date Written: April 30, 2012


This paper studies bargaining and exchange in a networked market with intermediation. Possibilities to trade are restricted through a network of existing relationships and traders bargain over the division of available gains from trade along different feasible routes. Using a stochastic model of bargaining, I characterize stationary equilibrium payoffs as the fixed point of a set of intuitive value function equations and study efficiency and the relationship between network structure and payoffs. In equilibrium, trade is never unduly delayed but it may take place too early and in states where delay would be efficient. The inefficiency arises from a hold-up threat and the inability of bargaining parties credibly to commit to a split in a future period. The model also shows how with competing trade routes as trade frictions go to zero agents that are not essential to a trade opportunity receive a payoff of zero.

Keywords: stochastic games, bargaining, random matching, middlemen, network

JEL Classification: C73, C78, L14

Suggested Citation

Siedlarek, Jan-Peter and Submitter, FEEM RPS, Intermediation in Networks (April 30, 2012). FEEM Working Paper No. 42.2012. Available at SSRN: or

Jan-Peter Siedlarek (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

FEEM RPS Submitter

affiliation not provided to SSRN

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