Abstract
This paper studies the strategic introduction of an opaque channel by incumbent rms. We endow a circular city model with an intermediary that sells lotteries (opaque products) over goods produced by upstream rms. Compared to the benchmark model (Salop, 1979), opaque intermediation creates value (welfare) by increasing the intensity of price competition and expanding industry sales, but the eect on the value captured by the rms is ambiguous. We show that rms can use the opaque intermediary as a
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