Intermediation and Competition in Search Markets: An Empirical Case Study
80 Pages Posted: 17 Aug 2020 Last revised: 10 Mar 2023
Date Written: August 2020
Intermediaries in decentralized markets can affect buyer welfare both directly, by reducing expenses for buyers with high search cost and indirectly, through a search-externality that affects the prices paid by buyers that do not use intermediaries. I investigate the magnitude of these effects in New York City’s trade-waste market, where buyers can either search by themselves or through a waste broker. Combining elements from the empirical search and procurement-auction literatures, I construct and estimate a model for a decentralized market. Results from the model show that intermediaries improve welfare and benefit buyers in both the broker and the search markets.
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