We develop a model of decentralized monetary exchange that can be used to examine the distributional effects of inflation across heterogeneous agents who have private information. The private information can be about the productivity, preferences, or money holdings of the agents. Matching is multilateral and each seller is visited by a stochastic number of buyers. The good is allocated according a second-price auction in money. In equilibrium, homogeneous buyers hold different amounts of money leading to price dispersion. We find the closed-form solution for the distribution of money holdings. Entry of sellers is suboptimal except at the Friedman rule. When agents differ in productivity, inflation acts as a regressive tax, at least for moderate rates of money growth.
A Model of Money with Multilateral Matching
Journal of Monetary Economics, 2008, Vol. 55, pp. 1054-1066. With M. Galenianos.
We characterize price dispersion and welfare in a monetary model with private information: inflation is regressive even though the rich hold more money.
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Econometrica, 2010, Vol. 78(2), 539–574. With Jan Eeckhout. In search models with price competition the sorting of heterogeneous buyers and sellers depends on complementarities both in output and in search. Go to paper
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B.E. Journals of Theoretical Economics, 2013, Vol 13 (1). With S. Ludwig and A. Sandroni. We document a revealed preference for randomization for “social goods”, while such non-standard behavior is not present for private consumption goods. Go to paper
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Review of Economic Studies, 2011, Vol. 78 (3), 872-906. With Jan Eeckhout. Wage and employment data can identify the strength of sorting in search models, though two-sided fixed effects are always mis-specified. Go to paper
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Journal of Economic Literature, 2021 59(1): 90-148. With R. Wright,B. Julien, and V. Guerrieri. This survey presents a comprehensive overview of the directed/competitive search literature. Go to paper
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Journal of the European Economic Association, 2022, 20(6), 2317–2352. This paper showcases studies that illustrate the potential of analyzing online job search data and of intervening in the online job search process, and highlights conditions under which some of the recent interventions are likely to improve market outcomes overall, rather than improving only the outcomes for the treated individuals. Go to paper
Journal of Economic Theory, 2010/145, 1354-1385. With Jan Eeckhout. Search affects competing mechanisms: if meetings with low types reduce those of high types, price posting and market separation replace auctions. Go to paper