A Model of Merchants Articles uri icon

authors

  • WATANABE WATANABE, MAKOTO

publication date

  • September 2010

start page

  • 1865

end page

  • 1889

issue

  • 5

volume

  • 145

International Standard Serial Number (ISSN)

  • 0022-0531

Electronic International Standard Serial Number (EISSN)

  • 1095-7235

abstract

  • I propose a simple model of merchants who are specialized in buying and selling a homogeneous good. Facing the same frictions as in the buyer-seller direct trades, merchants can make profits with an ability to buy and sell many units of the good. They set the price to compete in the market and provide buyers with a strong likelihood of obtaining the good. This paper establishes a turnover equilibrium where some agents choose to become merchants endogenously. An interesting multiplicity can emerge.