Endogenous Intermediation in a Model of Search
نویسندگان
چکیده
This paper develops a minimal model of an economy with intermediation. The focus is on the endogenous choice of homogeneous agents between specializing as producers or as merchants. Merchants operate alongside a decentralized search market and provide immediacy in exchange. Endogenous choice requires that agents be free to move between the two occupations at any time. Using only this condition, we characterize the equilibria in which merchants are active, and investigate the welfare properties of such equilibria. ∗Kunal Sengupta provided various insights and suggestions. We also thank Guillaume Rocheteau and Andrew Wait for comments on an earlier draft.
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