Horizontally Differentiated Market Makers

Loertscher, Simon (September 2005). Horizontally Differentiated Market Makers (Discussion Papers 05-10). Bern: Department of Economics

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I present a model of competition between two market makers who are horizontally differentiated. I first show that absent a search market for buyers and sellers, there is a continuum of symmetric equilibria. These equilibria are payoff equivalent for market makers, but affect buyers’ and sellers’ welfare in opposite ways. Second, I analyze the model when buyers and sellers can also exchange the good in search markets. The model
with search markets shares many features with existing models, yet allows competing intermediaries to net a profit in equilibrium. Interestingly, the model exhibits a complementarity between intermediaries’ profits in the presence of search markets. Third, I show that every equilibrium in a game with market makers is also an equilibrium in an appropriately defined game with matchmakers.

Item Type:

Working Paper

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics

UniBE Contributor:

Lörtscher, Simon

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

Series:

Discussion Papers

Publisher:

Department of Economics

Language:

English

Submitter:

Lars Tschannen

Date Deposited:

02 Oct 2020 10:33

Last Modified:

02 Oct 2020 10:33

JEL Classification:

C72, D41, D43, L13

BORIS DOI:

10.7892/boris.145671

URI:

https://boris.unibe.ch/id/eprint/145671

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