Middlemen: Connecting Consumers and Producers

Most of what people think about when the term “Middleman” is brought up, is somebody who doesn’t provide much value. Why hire a middleman when you could do the job yourself? Even today when the internet has lowered search and transaction costs, it seems as if the job of a middleman would soon disappear. But this notion may not be true.

Middlemen provide a service of efficiency which does have value in itself, but some argue that this job will become obsolete as the internet is more widely available today. The cost of searching for an item has gone down and people can find what they need faster and more efficiently. But as technology grows there will always be a need for those middlemen who know their way around that technology. They can provide their services and use their efficiency to help clients.

As Marina Krakovsky says in her interview with Russ Roberts of Econtalk, “anybody who is connecting with other people in a network is a middleman.” Many people are these middlemen such as brokers, salespersons, or wedding planners. Krakovsky uses the job of a wedding planner as an example to explain the economics behind what a middleman can provide.

One of the most important skills that a middleman provides is being able to speak the language of both ends, the consumer and producer. The middleman is able to communicate with the consumer about their tastes and preferences. He or she also has relationships with valuable producers and firms that the consumer might not be able to find on their own. As the Krakovsky explains in her interview, wedding planners have a “long-run reputation… with… vendors that… can [be] leverage on behalf of the bride.” Wedding planners and other middlemen have this value to offer to their clients, which people use because middlemen do their job more efficiently than their clients can. Middlemen simply specialize in connecting consumers and producers.



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