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Money and Middlemen in an Economy with Private Information

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  • Li, Yiting

Abstract

This paper extends the Williamson-Wright model to study interaction between money and middlemen in an economy with qualitative uncertainty concerning the consumption goods. It is shown that, with private information as the only trading friction, given that expert middlemen endogenously arise, people may still be willing to adopt indirect exchange involving money. Generally recognizable money improves welfare by promoting useful exchange and economizing on the cost of agents becoming middlemen. In an economy with trading frictions caused by private information and a double coincidence of wants problem, the authors show that there is room for both intermediary institutions. Copyright 1999 by Oxford University Press.

Suggested Citation

  • Li, Yiting, 1999. "Money and Middlemen in an Economy with Private Information," Economic Inquiry, Western Economic Association International, vol. 37(1), pages 1-12, January.
    • Handle: RePEc:oup:ecinqu:v:37:y:1999:i:1:p:1-12
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    Cited by:

    1. Tao Peng, 2017. "Money And Product Quality Under Asymmetric Information," Economic Inquiry, Western Economic Association International, vol. 55(3), pages 1388-1399, July.
    2. Shouyong Shi, 2006. "Viewpoint: A microfoundation of monetary economics," Canadian Journal of Economics, Canadian Economics Association, vol. 39(3), pages 643-688, August.
    3. Trejos, Alberto & Wright, Randall, 2016. "Search-based models of money and finance: An integrated approach," Journal of Economic Theory, Elsevier, vol. 164(C), pages 10-31.
    4. Pingle, Mark & Mukhopadhyay, Sankar, 2010. "Private money as a competing medium of exchange," Journal of Macroeconomics, Elsevier, vol. 32(2), pages 541-554, June.
    5. Randall Wright & Yuet‐Yee Wong, 2014. "Buyers, Sellers, And Middlemen: Variations On Search‐Theoretic Themes," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(2), pages 375-397, May.
    6. Fan, Ying & Fu, Yuqi & Yang, Zan & Chen, Ming, 2024. "Search frictions in rental markets: Evidence from urban China," China Economic Review, Elsevier, vol. 83(C).
    7. Camera, G., 2001. "Search, Dealers, and the Terms of Trade," Purdue University Economics Working Papers 1140, Purdue University, Department of Economics.
    8. Bajaj, Ayushi, 2018. "Undefeated equilibria of the Shi–Trejos–Wright model under adverse selection," Journal of Economic Theory, Elsevier, vol. 176(C), pages 957-986.
    9. Shouyong Shi, 2006. "A Microfoundation of Monetary Economics," Working Papers tecipa-211, University of Toronto, Department of Economics.
    10. Yuet-Yee Wong & Randall Wright, 2011. "Buyers, sellers and middlemen: variations in search theory," Working Papers 691, Federal Reserve Bank of Minneapolis.
    11. Fan, Ying & Fu, Yuqi & Yang, Zan & Chen, Ming, 2023. "Search Frictions in Rental Markets: Evidence from Urban China," Working Paper Series 23/11, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.

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