Working Paper: NBER ID: w27700
Authors: Tobias Salz
Abstract: Intermediaries in decentralized markets can affect buyer welfare both directly, by reducing expenses for buyers with high search cost and indirectly, through a search-externality that affects the prices paid by buyers that do not use intermediaries. I investigate the magnitude of these effects in New York City’s trade-waste market, where buyers can either search by themselves or through a waste broker. Combining elements from the empirical search and procurement-auction literatures, I construct and estimate a model for a decentralized market. Results from the model show that intermediaries improve welfare and benefit buyers in both the broker and the search markets.
Keywords: intermediation; competition; search markets; buyer welfare; trade waste market
JEL Codes: D43; D44; L0; L13; L81; L97
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| intermediaries (L14) | buyer welfare (D69) |
| search costs (D23) | buyer expenses (R21) |
| intermediaries (L14) | search externality (D62) |
| intermediaries (L14) | average expenses for buyers (D12) |