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Middle Men: The Visible Market-Makers

Author

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  • Makoto Watanabe

    (VU University Amsterdam, Tinbergen Institute)

Abstract

This paper presents a framework in which middlemen emerge to intermediate between ex-ante homogeneous buyers and sellers in the presence of search frictions. Middlemen announce prices, and hold an inventory to provide more sure services. Middlemen can mitigate trade imbalances with price competition. Using this framework I illustrate how the frictionless limit can emerge and how middlemen can implement the short-side principle for the market price to be Walrasian. The recent progress in the literature on intermediation will also be discussed.

Suggested Citation

  • Makoto Watanabe, 2018. "Middle Men: The Visible Market-Makers," The Japanese Economic Review, Springer, vol. 69(2), pages 156-170, June.
    • Handle: RePEc:spr:jecrev:v:69:y:2018:i:2:d:10.1111_jere.12168
    DOI: 10.1111/jere.12168
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    Cited by:

    1. Pieter Gautier & Bo Hu & Makoto Watanabe, 2023. "Marketmaking Middlemen," RAND Journal of Economics, RAND Corporation, vol. 54(1), pages 83-103, March.
    2. Watanabe Makoto, 2020. "Middlemen: A Directed Search Equilibrium Approach," The B.E. Journal of Macroeconomics, De Gruyter, vol. 20(2), pages 1-37, June.

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    More about this item

    Keywords

    D4; D5; D6; D8; G2; L1;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D6 - Microeconomics - - Welfare Economics
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • G2 - Financial Economics - - Financial Institutions and Services
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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