Transaction costs are usually thought to be a major source of inefficiency because they do not allow efficient trades to take place. One might think that lowering transaction costs is always welfare-improving. This paper argues that, in contrast to conventional wisdom, it may be beneficial to...

This paper compares the equilibrium outcomes in search markets with and without referrals. Although it seems clear that consumers would benefit from referrals, it is not at all clear whether firms would unilaterally provide information about competing offers since such information could...