Middlemen as Information Intermediaries: Evidence from Used Car Markets

Biglaiser, Gary; Li, Fēi; Murry, Charles; Zhou, Yiyi

doi:10.2139/ssrn.3003562

Cited by 6 publications

(3 citation statements)

References 47 publications

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“…A final challenging extension would be to incorporate asymmetric information in a more detailed treatment of the "microstructure" of trade in the automobile market, including endogenous intermediation of trade by car dealers as well as direct consumer transactions. Recent studies such as Biglaiser, Li, Murry and Zhou (2019) have provided new empirical insights into the microstructure of trade that are not modeled in our framework, but represent important directions to pursue in the development of more detailed and realistic models of trade in automobile markets.…”

Section: Discussionmentioning

confidence: 99%

Equilibrium Trade in Automobile Markets

Gillingham¹,

Iskhakov²,

Munk-Nielsen³

et al. 2019

SSRN Journal

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Section: Discussionmentioning

confidence: 99%

Equilibrium Trade in Automobile Markets

Gillingham¹,

Iskhakov²,

Munk-Nielsen³

et al. 2019

SSRN Journal

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“…There is a large literature studying the role of intermediaries in online markets (e.g., Brynjolfsson and Smith 2000;Morton, Zettelmeyer, and Silva-Risso 2001;Brown and Goolsbee 2002;Brynjolfsson, Hu, and Smith 2003;Baye, Morgan, and Scholten 2003;Ellison and Ellison 2009; Quan and Williams 2016), 5 and in financial markets, banking, and asset pricing (e.g., James 1987, Diamond 1984, He and Krishnamurthy 2013Brunnermeier and Sannikov 2014;Gavazza 2016). 6 Intermediation also plays an important role in labor markets (e.g., Stanton and Thomas 2016), agrifood chains (e.g., Lee, Gereffi, and Beauvais 2012), facilitating trade (e.g., Ahn, Khandelwal, and Wei 2011), and certifying information in markets with adverse selection (e.g., Biglaiser 1993;Lizzeri 1999;Biglaiser, Li, Murry, and Zhou 2017). Relative to these papers, our contribution is to estimate the welfare implications due to the presence of intermediaries in the industry, accounting for the change in the market structure created by the presence of the intermediaries and the additional services that intermediaries offer to consumers which differentiates their products from the ones of the manufacturers.…”

Section: Related Literaturementioning

confidence: 99%

Measuring the Welfare of Intermediaries

Donna

Pereira²,

Pires

et al. 2022

Management Science

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We investigate the welfare of intermediaries in oligopolistic markets where intermediaries offer additional services. We exploit the unique circumstance that in the empirical setting studied, outdoor advertising, consumers can purchase from manufacturers or intermediaries. Intermediaries provide additional services to the consumers and charge a margin for them. Intermediaries provide the following additional services: search services (information about products), purchase-aggregation services (access to quantity discounts), and consulting services. We specify an equilibrium model and structurally estimate it using market-level data. The demand includes consumers with costly search and channel-specific preferences. The supply includes two distribution channels. One features bargaining about wholesale prices between manufacturers and intermediaries and downstream price competition. The other is vertically integrated. We show how Google search data can be used to identify the search-cost parameters. We use the estimated model to simulate counterfactual scenarios where intermediaries do not offer additional services. We find that the three services considered provide value to consumers, with search playing a prominent role. Our analysis helps explain why intermediaries are ubiquitous in modern economies despite the double marginalization. This paper was accepted by Matthew Shum, marketing.

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“…Ahn, Khandelwal, and Wei 2011), and certifying information in markets with adverse selection (e.g. Biglaiser 1993;Lizzeri 1999;Biglaiser, Li, Murry, and Zhou 2017). Relative to these papers, our contribution is to estimate the welfare implications due to the presence of intermediaries in the industry, accounting for the change in the market structure created by the presence of the intermediaries, and the three additional services that intermediaries offer to consumers which differentiates their products from the ones of the manufacturers.…”

Section: Related Literaturementioning

confidence: 99%

Measuring the Welfare of Intermediation in Vertical Markets

et al. 2018

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We empirically investigate the welfare implications of intermediaries in oligopolistic markets, where intermediaries offer additional services to differentiate their products from the ones of the manufacturers. Our identification strategy exploits the unique circumstance that, in the outdoors advertising industry, there are two distribution channels: consumers can purchase the product either directly from manufacturers, or through intermediaries. We specify a differentiated products' equilibrium model, and estimate it using product-level data for the whole industry. On the demand side, the model includes consumers who engage in costly search with preferences that are specific to the distribution channel. On the supply side, the model includes two competing distribution channels. One features two layers of activity, where manufacturers and intermediaries bargain over wholesale prices, and intermediaries compete on final prices to consumers. The other is vertically integrated. The estimated model is used to simulate counterfactual scenarios, where intermediaries do not offer additional services. We find that the presence of intermediaries increases welfare because the value of their services outweighs the additional margin charged.

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Middlemen as Information Intermediaries: Evidence from Used Car Markets

Cited by 6 publications

References 47 publications

Equilibrium Trade in Automobile Markets

Equilibrium Trade in Automobile Markets

Measuring the Welfare of Intermediaries

Measuring the Welfare of Intermediation in Vertical Markets

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