Search Intermediaries

25 Pages Posted: 12 Apr 2012

See all articles by Xianwen Shi

Xianwen Shi

University of Toronto - Department of Economics

Aloysius Siow

University of Toronto - Department of Economics; IZA Institute of Labor Economics

Date Written: February 6, 2012

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. This paper studies how brokers can help reduce these costs by managing the level and mix of goods in their inventory. We find that intermediaries emerge and improve social welfare when there is sufficient heterogeneity in the types of goods and preferences. Our analysis highlights how learning and inventory management enable search intermediaries to internalize information externalities generated in unintermediated private search.

Keywords: search, intermediation, learning, externalities, inventory management

JEL Classification: D83, D82

Suggested Citation

Shi, Xianwen and Siow, Aloysius, Search Intermediaries (February 6, 2012). Available at SSRN: https://ssrn.com/abstract=2000230 or http://dx.doi.org/10.2139/ssrn.2000230

Xianwen Shi (Contact Author)

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S3G7
Canada

Aloysius Siow

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S 3G7
Canada
416-978-4139 (Phone)
416-978-6713 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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