Intermediary Commissions in a Regulated Market with Heterogeneous Customers

We analyze competition among firms within a regulated industry, where intermediaries’ commissions are paid by customers and set exogenously. When firms set their prices they take into account the impact of the commissions... [ view full abstract ]

We analyze competition among firms within a regulated industry, where intermediaries’ commissions are paid by customers and set exogenously. When firms set their prices they take into account the impact of the commissions over the intermediaries’ advice and consumers’ choices. We show that in this setting, the effect of a change in commissions in the equilibrium prices and quantities is non trivial. The model sheds some light on the analysis of the retirement market in Chile, where the annuitization rate decreased after a reform that reduced commissions paid by retirees who choose an annuity.