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Intermediation in networks

Author

Listed:
  • Jan-Peter Siedlarek

    (Federal Reserve Bank of Cleveland)

Abstract

This paper studies decentralized trade in networked markets with intermediaries using a stochastic model of multilateral bargaining in which players compete on different routes through the network. The paper characterizes stationary equilibrium payoffs as the fixed point of a set of intuitive value function equations and studies efficiency and the impact of network structure on payoffs. In equilibrium players will never pass on an efficient trade opportunity, but they may trade in situations where delay would be efficient. With homogeneous surplus, the payoffs for players who are not essential to a trade opportunity go to zero if there is at least one essential player as trade frictions vanish.

Suggested Citation

  • Jan-Peter Siedlarek, 2025. "Intermediation in networks," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 79(3), pages 1083-1105, May.
    • Handle: RePEc:spr:joecth:v:79:y:2025:i:3:d:10.1007_s00199-024-01611-7
    DOI: 10.1007/s00199-024-01611-7
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    More about this item

    Keywords

    Intermediation; Over-the-counter markets; Financial networks; Stochastic games;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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