Market-making middlemen

Economics

Speaker:Makoto Watanabe, VU Amsterdam
Date: Friday 11 November 2016
Time: 15.30
Location: Matrix Lecture Theatre, Building One

Further details

This paper develops a model in which market structure is determined endogenously by the choice of intermediation mode. We consider two representative business modes of intermediation that are widely used in real-life markets: one is a middleman mode where an intermediary holds inventories which he stocks from sellers for the purpose of reselling to buyers; the other is a market-making mode where an intermediary o ers a platform for buyers and sellers to trade with each other. We show that a marketmaking middleman, who adopts the mixture of these two intermediation modes, can emerge in a directed search equilibrium.