Buyers, Sellers, and Middlemen: Variations on Search‐Theoretic Themes

23 Pages Posted: 24 Apr 2014

See all articles by Randall Wright

Randall Wright

University of Wisconsin - Madison - Department of Finance, Investment and Banking; Federal Reserve Banks - Federal Reserve Bank of Minneapolis

Yuet‐Yee Wong

Binghamton University

Date Written: May 2014

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.

Suggested Citation

Wright, Randall D. and Wong, Yuet‐Yee, Buyers, Sellers, and Middlemen: Variations on Search‐Theoretic Themes (May 2014). International Economic Review, Vol. 55, Issue 2, pp. 375-397, 2014. Available at SSRN: https://ssrn.com/abstract=2428479 or http://dx.doi.org/10.1111/iere.12053

Randall D. Wright

University of Wisconsin - Madison - Department of Finance, Investment and Banking ( email )

975 University Avenue
Madison, WI 53706
United States
608-263-3860 (Phone)

Federal Reserve Banks - Federal Reserve Bank of Minneapolis

90 Hennepin Avenue
Minneapolis, MN 55480
United States

Yuet‐Yee Wong

Binghamton University ( email )

PO Box 6001
Binghamton, NY 13902-6000
United States

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