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Intermediaries and Trade Efficiency

Authors: Bruce I. Carlin;

Intermediaries and Trade Efficiency

Abstract

Bargaining with bilateral asymmetric information is generally not efficient. In this paper, I develop a theoretical model to show that firms can recapture trade efficiency and avoid this surplus loss by adding an intermediary to the trading mechanism. This increase in total surplus motivates firms to invest in distribution channels and reseller networks. In the model, the intermediary serves as a mechanism by which firms can commit to bilaterally favorable prices and coordinate their offers during bargaining. The expected gain to the intermediary is non-negative and the intermediary never suffers an ex-post loss. This result suggests that vertical integration between a producer and a distributor may destroy value, despite its use in removing double marginalization.

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
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