Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2012-12-10
Number: 12-138/V
Author-Name: Makoto Watanabe
Author-Workplace-Name: VU University Amsterdam
Title: Middlemen: A Directed Search Equilibrium Approach
Abstract: This paper studies an intermediated market operated by middlemen with high inventory holdings. I present a directed search model in which middlemen are less likely to experience a stockout because they have the advantage of inventory capacity, relative to other sellers. The model explains why popular items are sold at a larger premium, and everyday items at a larger discount, by large-scaled intermediaries. The concentration of middlemen's market, i.e., few middlemen, each with large capacity, can lead to a higher matching efficiency, but with a lower total welfare, compared to having many middlemen, each with small capacity.
Classification-JEL: D4, F1, G2, L1, L8, R1
Keywords: Directed Search, Intermediation, Inventory holdings
File-Url: https://papers.tinbergen.nl/12138.pdf
File-Format: application/pdf
File-Size: 393909 bytes
Handle: RePEc:tin:wpaper:20120138