Abstract
This paper investigates whether coordination failures in a trading environment with multiple equilibria are robust to adding a specialist into the market. Using a simple search model, it is shown that the specialist eliminates some/all of the Pareto-dominated search equilibria. However, the specialist also creates a new source of coordination problem by creating a new equilibrium where all traders go to him. As a result, whether the specialist raises or lowers welfare depends on the search costs, matching technology, and the cost of intermediation.
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