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.
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
American Economic Review P&P, 2017, 107(5): 158–162 With J. Greenwood, C. Santos & M. Tertilt. In a quantitative equilibrium model of sexual behavior and HIV/AIDS transmission we study policies that encourage long-term partnerships. Go to paper
International Economic Review, 2012, Vol 53 (1), 1-21. With M. Galenianos. We study a finite directed-search wage posting game among heterogeneous firms (allowing for risk aversion, moral hazard,…), including limit theorems. Go to paper
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 Economic Theory, 2009, 114(2), pp. 445-471. With Manolis Galenianos. We study wage dispersion and (in)efficiency in directed search when workers can strategically apply for multiple jobs but firms can only make one offer. 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