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#cfa #cfa-level-1 #economics #microeconomics #reading-13-demand-and-supply-analysis-introduction #study-session-4
Brokers do not actually become owners of a good or service that is being bought, but they serve the role of locating buyers for sellers or sellers for buyers. (Dealers, however, actually take possession of the item in anticipation of selling it to a future buyer.) To the extent that brokers serve to reduce search costs, they provide value in the transaction, and for that value they are able to charge a brokerage fee. Although the brokerage fee could certainly be viewed as a transactions cost, it is really a price charged for the service of reducing search costs
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3.13. Market Interference: The Negative Impact on Total Surplus
costs , and they arise because of frictions inherent in the matching process. When these costs are significant, an opportunity may arise for a third party to provide a valuable service by reducing those costs. This role is played by brokers. <span>Brokers do not actually become owners of a good or service that is being bought, but they serve the role of locating buyers for sellers or sellers for buyers. (Dealers, however, actually take possession of the item in anticipation of selling it to a future buyer.) To the extent that brokers serve to reduce search costs, they provide value in the transaction, and for that value they are able to charge a brokerage fee. Although the brokerage fee could certainly be viewed as a transactions cost, it is really a price charged for the service of reducing search costs. In effect, any impediment in the dissemination of information about buyers’ and sellers’ willingness to exchange goods can cause an imbalance in demand and supply. So anything that imp


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