Brokers are able to gather information about individuals' reputations for trustworthiness at a lower effective cost than individual buyers and sellers because a broker's investment is less transaction specific. When a buyer and a seller invest in acquiring information about their respective reputations only to find that the buyer needs a particular size stone that the seller does not have, the parties have lost part of their investment. While the information acquired may be useful to them in the future, its value diminishes over time as its accuracy decreases. In contrast, a broker who has this information can shop around immediately for new trading partners for either party.

XREF: Relates to transaction cost economics and principal-agent theory; echoes why intermediaries exist in financial and labor markets beyond the gem trade example.

Lisa Bernestein, Opting out of the Legal Sys…, loc. 133