#A middleman refers to free

The first form corresponds to a business model in which the dealer sets the wholesale price for sellers and sets theretail price for buyers, and sellers and buyers are price-takers. In the second form of intermediary exchange, the intermediary does not take control of theseller’s products, but simply offers access to a platform (or marketplace) wherebuyers and sellers can interact as they see fit: pricing is decentralized to marketparticipants, and the platform- taxes trade. In one оf thе forms of intermediary exchanges, the intermediary acts as a dealer (retailer) in a sense that it buys products from sellersand resells them to buyers: pricing is centralized by the intermediary. To understand the choice of an intermediary, let us focus on the organization ofexchange of products (goods and services) between sellers and buyers throughthe two extreme forms of intermediary exchanges, ignoring the other roles thatintermediaries often play. The intermediary is the most useful when trade ratios are high and when the intermediary stores mature credits, which eliminates ecological uncertainty and thereby offers cost savings for developers, and may result in a higher level of biodiversity. This welfare loss may be lower than the loss from transaction costs and trade ratios in decentralised trade, even in the case of the intermediary having both monopoly and monopsony power. When the intermediary has market power, selling and buying prices deviate from the competitive equilibrium. Intermediaries decrease the trading parties’ transaction costs by offering specialised information, reduce uncertainty, and decrease the costs of offsetting by increasing liquidity in the market and offering certain offset credits. As a drawback, the intermediary may exploit market power upstream or downstream due to ecological features of the offset market. By buying, holding and selling offset credits from storage, the intermediary can decrease both financial and ecological risks in the market. Specialised intermediaries facilitate trading by providing information and brokering services. These markets are characterised by high information requirements and transaction costs, threatening economic efficiency and even biodiversity outcomes. This paper provides a behavioural and welfare analysis of an intermediary in biodiversity offset markets. Finally, we establish the coincidence between the core and the set of competitive equilibrium payoff vectors. However, we prove that in these small markets the maximum core payoff to each middleman is her marginal contribution. In general, the core does not exhibit a middleman-optimal allocation, not even when there are only two buyers and two sellers. Second, we prove that matching markets with middlemen are totally balanced: in particular, we show the existence of a buyer-optimal (seller-optimal) core allocation where each buyer (seller) receives her marginal contribution to the grand coalition.

#A middleman refers to free

We first show that, in our context, an optimal matching can be obtained by considering the two-sided assignment market where each buyer–seller pair is allowed to use the mediation services of any middleman free of charge.

For each such market, we examine the associated TU game. In our framework, a buyer–seller pair may either trade directly or use the services of a middleman and a middleman may serve multiple buyer–seller pairs. This paper studies matching markets in the presence of middlemen. The comparison between the two mechanisms gives a stylized intuition for the hierarchical structure of larger markets and institutions. Finally, I show that in large markets the dynamic mechanism and Vickrey-like auction have the same expected total surplus. Nevertheless, under mild conditions the agents are ex ante better off under the dynamic mechanism relative to a Vickrey-like auction because the intermediaries are more able to exploit information asymmetries in the dynamic mechanism than agents are able to exploit information asymmetries in the Vickrey-like auction. The dynamic mechanism is inefficient with positive probability. This mechanism has a unique (up to permutation) weak perfect Bayesian equilibrium. I construct a novel dynamic mechanism implemented by a principal who faces a set of intermediaries, each of whom represents an ex ante identical set of agents.

Why do some incomplete information markets feature intermediaries while others do not? I study the allocation of two goods in an incomplete information setting with a single principal, multiple agents with unit demand, and interdependent valuations.