Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/87210 
Year of Publication: 
2012
Series/Report no.: 
Tinbergen Institute Discussion Paper No. 12-138/V
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
Abstract: 
This paper studies an intermediated market operated by middlemen with high inventory holdings. I present a directed search model in which middlemen are less likely to experience a stockout because they have the advantage of inventory capacity, relative to other sellers. The model explains why popular items are sold at a larger premium, and everyday items at a larger discount, by large-scaled intermediaries. The concentration of middlemen's market, i.e., few middlemen, each with large capacity, can lead to a higher matching efficiency, but with a lower total welfare, compared to having many middlemen, each with small capacity.
Subjects: 
Directed Search
Intermediation
Inventory holdings
JEL: 
D4
F1
G2
L1
L8
R1
Document Type: 
Working Paper

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