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Title: Intermediation and Steering: Competition in Prices and Commissions
Authors: Teh, TH
Wright, J 
Issue Date: 1-Jan-2022
Publisher: American Economic Association
Citation: Teh, TH, Wright, J (2022-01-01). Intermediation and Steering: Competition in Prices and Commissions. American Economic Journal: Microeconomics 14 (2) : 281-321. ScholarBank@NUS Repository.
Abstract: We explore the implications of steering by an informed profit-maximizing intermediary. The intermediary steers consumers by recommending firms, taking into account both the commissions firms offer and the prices they set. Such steering results in higher commissions and consumer prices, so that consumers only benefit from intermediation when their search cost is sufficiently high. Steering reverses the normal relationship between competition and price, with prices increasing in the number of competing firms. We use the framework to study various policies including commission caps (absolute or relative), commission disclosure, promoting information provision, and penalties for inappropriate advice
Source Title: American Economic Journal: Microeconomics
ISSN: 1945-7669
DOI: 10.1257/mic.20190344
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