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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Inferring Risk Perceptions and Preferences using Choice from Insurance Menus: Theory and Evidence
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Econometrica, 2015, Vol 83 (5), 1849-1875. With K. Kim. [online appendix] We introduce cheap-talk into a market game and study if the equilibrium can replicate the constraint efficient allocation under (reserve) price posting. Go to paper
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Review of Economic Studies, 2019 86(4): 1411-1447. With Michèle Belot and Paul Muller. We develop and evaluate experimentally a novel tool that redesigns the job search process by providing tailored online advice about related occupations. Go to paper
Journal of Political Economy, 2017, 124(1), 224-264. With G. Grossman & E. Helpman. (simulations, matlab). We introduce two-sided heterogeneity into a Hecksher-Ohlin-style trade model to study factor reallocation and wage inequality within and across sectors. Go to paper