How the sellers offer to rebate part of expense to buyers

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emand with zero transaction costs is Q of 1 sub D = 50 - P and supply is Q sub S = -7 + 2P.

Verify the prices and quantities calculated in the discussion.

Now assume intermediaries come from a competitive market with an equilibrium price of $8 per unit for their services, that is, any buyer or seller who wants intermediary's services must pay $8 for them. What is the maximum per unit that sellers are willing to pay intermediaries if hiring them saves buyers $8 in transaction costs.

Does your answer to Question 16a change if buyers pay $8 per unit to the intermediary but sellers offer to rebate part of the expense to the buyers?

Reference no: EM13189105

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