This paper shows how including divisibility of goods and productive heterogeneity leads to the emergence of middlemen in an equilibrium search environment. In the baseline model, middlemen are welfare reducing and their number increases as market frictions are reduced. When the model is extended to allow for time taken in production and increasing returns-to-scale in the market meeting technolo...

This paper investigates an important channel through which improved access to market information could increase the prices that producers receive from middlemen. I develop a theoretical model of trade between a farmer and a middleman which allows for the existence of different types of middlemen. The source of heterogeneity is attitudes towards fairness. I provide an empirical test of the theor...

Critical nodes—or “middlemen”—have an essential place in both social and economic networks when considering the flow of information and trade. This paper extends the concept of critical nodes to directed networks. We identify strong and weak middlemen. Node contestability is introduced as a form of competition in networks; a duality between uncontested intermediaries and middlemen is establishe...

We present a model in which the microstructure of trade in a commodity or asset is endogenously determined. Producers and consumers of a commodity (or buyers and sellers of an asset) who wish to trade can choose between two competing types of intermediaries: “middlemen” (dealer/brokers) and “market makers” (specialists). Market makers post publicly observable bid and ask prices, whereas the pri...

Eliminating middlemen from security protocols helps less than one would think. EMV electronic payments, for example, can be made fairer by adding an electronic attorney – a middleman which mediates access to a customer’s card. We compare middlemen in crypto protocols and APIs with those in the real world, and show that a manin-the-middle defence is helpful in many circumstances. We suggest that...

A fundamental tension of between the efficiency and stability of social networks is now a well recognized fact in the literature. In general, networks are not simultaneously efficient and stable. Here we consider strongly pairwise stable networks and identify that the presence of middlemen is of particular importance for such a network to be efficient as well. We find that for the component wis...

This paper generalizes Rubinstein and Wolinsky’s model of middlemen (intermediation) by incorporating production and search costs, plus more general matching and bargaining. This allows us to study many new issues, including entry, efficiency and dynamics. In the benchmark model, equilibrium exists uniquely, and involves production and intermediation for some parameters but not others. Sometime...

The usefulness of quantitative decision aid is often impaired and its usage impeded by the misaligned priorities of analysts and the middlemen who employ them. Analysts’ professional orientation may dispose them to attend to analytic processes more than to deciders’ needs and to stick with outdated practices. As a result, their analyses may be technically sound but disregard key knowledge, make...