Download This PaperReducible Intermediation Chains
40 Pages Posted: 28 Mar 2016 Last revised: 30 Oct 2019
Date Written: October 25, 2019
Abstract
We introduce reducible intermediation chains in order to study the intermediation incentives of corporate bond dealers. We find that three quarters of intermediation chains mitigate search frictions, while the remaining one-quarter of chains arise due to the dealers' rent-seeking incentive. We provide an OTC model à la Stahl (1989) and show that an additional competition channel is necessary for the rent-seeking story to apply in the corporate bond markets.
Keywords: Intermediation chain, Search frictions, Over-the-counter
JEL Classification: G1, G12, D4, D83
Suggested Citation: Suggested Citation
An, Yu and Song, Yang and Zhang, Xingtan, Reducible Intermediation Chains (October 25, 2019). Available at SSRN: https://ssrn.com/abstract=2754235 or http://dx.doi.org/10.2139/ssrn.2754235
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