We study bilateral exchange, both direct trade and indirect trade that happens through chains
of intermediaries or middlemen. We develop a model of this activity and present applications.
This illustrates how, and how many, intermediaries get involved, and how the terms of trade are
determined. Bargaining with intermediaries depends on how they bargain with downstream intermediaries,
leading to interesting holdup problems. We discuss the roles of buyers and sellers in
bilateral exchange, and how to interpret prices. We develop a particular bargaining solution and
relate it to other solutions. We also illustrate how bubbles can emerge in the value of inventories.