Who Pays the Price of Brokerage? Transferring Constraint through Price Setting in the Staffing Sector

Abstract

This article analyzes how a broker's ability to affect prices and extract superior value from its position has economic consequences for the actors tied to it. I argue that intermediaries may exercise partial control in price setting by transferring the price constraints imposed on them by the actors on one side of the market to those on the other side. In so doing, they generate unequal returns for the brokered parties, who then receive different prices due to the nature of the tie between the broker and its other exchange partners. I investigate this argument using a novel mix of quantitative and qualitative data gathered from an intermediary in the staffing sector. The results show that the broker is able to transfer discounts offered to valued buyers (clients) on to the sellers (workers) matched with them, instead of reducing its own margins. As a result, actors with the same resource endowments receive different prices depending on the relationships among other exchange partners in a given triadic network of ties. Using qualitative fieldwork, I elaborate on the mechanisms that make the quantitative results feasible, and I discuss the implications for our understanding of the processes, dynamics, and market stratification consequences of brokerage.