In many decentralised markets, the traders who benefit most from an exchange do not employ intermediaries even though they could easily afford them. At the same time, employing intermediaries is not worthwhile for traders who benefit little from trade. Together, these decisions amount to non-monotone participation choices in intermediation: only traders of middle ``type'' employ intermediaries, while the rest, the high and the low types, prefer to search for a trading partner directly. We provide a theoretical foundation for this, hitherto unexplained, phenomenon. We build a dynamic matching model, where a trader's equilibrium bargaining share is a convex increasing function of her type. We also show that this is indeed a necessary condition for the existence of non-monotone equilibria.

DE FRAJA, G., Sakovics, J. (2012). Exclusive nightclubs and lonely hearts columns: non-monotone participation in optional intermediation. JOURNAL OF ECONOMIC BEHAVIOR & ORGANIZATION, 84(2), 618-632 [10.1016/j.jebo.2012.09.009].

Exclusive nightclubs and lonely hearts columns: non-monotone participation in optional intermediation

DE FRAJA, GIOVANNI;
2012-01-01

Abstract

In many decentralised markets, the traders who benefit most from an exchange do not employ intermediaries even though they could easily afford them. At the same time, employing intermediaries is not worthwhile for traders who benefit little from trade. Together, these decisions amount to non-monotone participation choices in intermediation: only traders of middle ``type'' employ intermediaries, while the rest, the high and the low types, prefer to search for a trading partner directly. We provide a theoretical foundation for this, hitherto unexplained, phenomenon. We build a dynamic matching model, where a trader's equilibrium bargaining share is a convex increasing function of her type. We also show that this is indeed a necessary condition for the existence of non-monotone equilibria.
Pubblicato
Rilevanza internazionale
Articolo
Esperti anonimi
Settore SECS-P/01 - Economia Politica
Italian
Con Impact Factor ISI
two-sided markets; intermediation; dynamic matching
DE FRAJA, G., Sakovics, J. (2012). Exclusive nightclubs and lonely hearts columns: non-monotone participation in optional intermediation. JOURNAL OF ECONOMIC BEHAVIOR & ORGANIZATION, 84(2), 618-632 [10.1016/j.jebo.2012.09.009].
DE FRAJA, G; Sakovics, J
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2108/123490
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