Multilevel Mediation in Symmetric Trees

Abstract The flourishing internet-based trade motivates our model of two-sided markets with multilevel mediation, in which a seller, intermediaries at various levels and buyers are embedded in a symmetric tree. Adapting the framework of the single-unit first price auction to trees, we show, in particular, the irrelevance of the tree structure for the buyers and order symmetric trees with respect to the seller's payoff. Furthermore, we characterize stable mediation structures in the presence of link (search) costs. Our results here confirm the stability of disintermediation.