Usage of packages depends on the investment of developing it and the amount of consumers and frequencies of using that package. Commission rate specified for broker 2. Demand realization 3. Transfer price schedule is established governing exchange between seller and buyer. Quantity intermediated is chosen.
Joint surplus is realized.
Intermediaries incur a known fixed cost F when they intermediate a transaction, which is assumed to be much smaller than the fixed cost of non-intermediated transaction. A maintained assumption of the model is that the process of intermediation takes time, and during this time unforeseen shocks can occur to the final demand for the good being intermediated. Specifically, demand is assumed to be uncertain at the time intermediary contracts are written, and is only realized after these contracts are formed. A Comparitive analysis of merchant and broker intermediation, J. of Economic Behavior and Org.