Abstract
This study examines how non-linearity and asymmetric demand, as well as the endogenous entry of suppliers, affect an intermediary's choice of being a platform, a merchant, or a hybrid of the two modes, and identifies the conditions for each mode of market making to be chosen. Further, we provide the ranking of social welfare for these three modes. We also identify the conditions under which the intermediary's optimal mode of market making is socially inefficient, thus providing justification for the regulation of intermediaries. Moreover, we provide a ranking of the equilibrium quantities under the three modes considered.
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