Technology Progress and the Market Power of Middlemen

The normative mathematic model is used to analyze the effect of the technology progress on middlemen. The incomes of traders and middlemen in different transaction mechanisms are compared on the base of static transaction models which are followed by the dynamic factor of technology progress. It can be found that the indirect trade is dominant in the circumstance where search cost is high. With the technology progress, the search cost trends to decrease. The increase in direct trade will have influence on the middlemen. But the middlemen will not disappear; its market power is dependent not only on the absolute level of the technology, but also on the comparative level of the technology adopted by the different transaction mechanisms.