COMPETITION BETWEEN INTERMEDIATED AND DIRECT TRADE AND THE TIMING OF DISINTERMEDIATION |
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Authors: | FINGLETON JOHN |
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Institution: | Department of Economics, Trinity College Dublin 2 |
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Abstract: | This paper analyses how intermediation by a middleman who buysfrom sellers and sells to buyers is affected if direct tradebetween buyers and sellers becomes possible. Without coordinationamong sellers and buyers, disintermediation may not occur whenit would be welfare-improving. With such coordination, disintermediationmay occur too early. If direct trade is active, the supply anddemand for intermediation become interdependent: an increasein the bid price thus increases both supply and demand. Thisprocess of interdependence by which the two trade mechanismscompete for trade is a feature of competing markets generally. |
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