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Competition between Intermediated and Direct Trade and the Timing of Disintermediation

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  • John Fingleton

Abstract

This paper analyses competition between direct and intermediated trade. We show that a middleman's supply and demand depend on both his bid and ask prices if sellers and buyers have the alternative of trading directly. Multiplicity also prevails. Direct trade does not constrain the market power of a middleman unless it is frictionless. Our results suggest that the timing of disintermediation is likely to be sub-optimal and have implications, more generally, for the analysis many functional goods markets where there are parallel or alternative trade channels for the same good.

Suggested Citation

  • John Fingleton, 1996. "Competition between Intermediated and Direct Trade and the Timing of Disintermediation," Economics Technical Papers 965, Trinity College Dublin, Department of Economics.
    • Handle: RePEc:tcd:tcduet:965
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    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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