Intermediary cost and coexistence puzzle

Intermediary Commissions and Kickbacks∗

We investigate the role of commissions paid by product providers to information intermediaries who advise customers on product suitability. These commissions and hidden “kickbacks” are widespread and controversial in markets for retail financial products and health services. We show that product providers have an incentive to pay commissions to steer the intermediary’s advice and to counteract ...

Rehypothecation and Intermediary Leverage

This paper provides a theory of endogenous leverage through rehypothecation in collateralized intermediation. Overcollateralization with an rehypothecation option arises as an optimal contract form between broker dealers and their clients to mitigate adverse selection on collateral quality. Such contract prevents the broker dealers from taking advantage of private information on collateral qual...

Equity Home Bias: Can Information Cost Explain the Puzzle?

Why do firms train apprentices? The net cost puzzle reconsidered

This paper investigates the short-term costs and benefits of apprenticeship training in Germany. It calls into question the popular stylised fact that apprenticeship training always leads to net costs during the apprenticeship period. We analyse the impact of the proportion of different occupational groups of apprentices on firm performance. We use representative matched employer–employee panel...

Intermediary Influence

Ronald Coase and others writing in his wake typically assume that institutional arrangements evolve to minimize transaction costs. This Article draws attention to a powerful, market-based force that operates contrary to that core assumption: “intermediary influence.” The claim builds on three observations: (1) many transaction costs now take the form of fees paid to specialized intermediaries, ...