The Market Structure of Intermediation

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Event details

Date and time 11.06.2021 10:3012:00  
Place and room
Zoom
Speaker Hongda ZHONG, LSE
Category Conferences - Seminars

A skilled intermediary can help many consumers find good products, thereby saving their duplicate screening costs. However, each consumer still needs to exert costly efforts to identify a skilled intermediary. I study the structure of the intermediary market, focusing on its size, transparency, and rounds of intermediations. With only one round of intermediation and a single product in need, efficiency is improved if and only if the intermediary sector is more transparent than the product market. When the same intermediaries operate in many different product markets, consumers can receive good products almost certainly, with vanishingly small screening costs, thereby achieving first best asymptotically. With two rounds of intermediations, a structure featuring heterogeneous transparency levels in the primary and secondary intermediary sectors can attain asymptotic first best, even with only one product market. These results shed light on the structure of social media influencers and fund of fund.