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Information Externalities and Intermediaries in Frictional Search Markets

Author

Listed:
  • Xianwen Shi
  • Aloysius Siow
Abstract
In frictional matching markets with heterogeneous buyers and sellers, sellers incur discrete showing costs to show goods to buyers who incur discrete inspection costs to assess the suitability of the goods on offer. We study how brokers can help reduce these costs by managing the level and mix of goods in their inventory. Intermediaries emerge and improve social welfare when there is sufficient heterogeneity in the types of goods and preferences. Learning and inventory management enable search intermediaries to internalize information externalities generated in unintermediated private search.

Suggested Citation

  • Xianwen Shi & Aloysius Siow, 2013. "Information Externalities and Intermediaries in Frictional Search Markets," Working Papers tecipa-496, University of Toronto, Department of Economics.
    • Handle: RePEc:tor:tecipa:tecipa-496
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    References listed on IDEAS

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    Cited by:

    1. Li, Yunan & Zhang, Xingtan, 2024. "Collective decision through an informed mediator," Journal of Economic Theory, Elsevier, vol. 218(C).
    2. Eren Bilen & Deniz Dizdar & Chun‐Hui Miao, 2023. "Search less for a better price," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 56(2), pages 622-646, May.

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    More about this item

    Keywords

    Search; Intermediation; Brokers; Housing Markets;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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