Intermediation in Networks

26 Pages Posted: 12 Oct 2015

See all articles by Jan-Peter Siedlarek

Jan-Peter Siedlarek

Federal Reserve Banks - Federal Reserve Bank of Cleveland

Multiple version iconThere are 2 versions of this paper

Date Written: 2015-10-09

Abstract

I study intermediation in networked markets using a stochastic model of multilateral bargaining in which players compete on different routes through the network. I characterize stationary equilibrium payoffs as the fixed point of a set of intuitive value function equations and study efficiency and the impact of network structure on payoffs. There is never too little trade but there may be an inefficiency through too much trade in states where delay would be efficient. With homogeneous trade surplus the payoffs for players that are not essential to a trade opportunity go to zero as trade frictions vanish.

Keywords: bargaining, financial networks, intermediation, matching, middlemen, networks, over-the-counter markets, stochastic games

JEL Classification: C73, C78, L14

Suggested Citation

Siedlarek, Jan-Peter, Intermediation in Networks (2015-10-09). FRB of Cleveland Working Paper No. 1518. Available at SSRN: https://ssrn.com/abstract=2672194 or http://dx.doi.org/10.2139/ssrn.2672194

Jan-Peter Siedlarek (Contact Author)

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

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

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