In a market where sellers compete by posting trading mechanisms, we allow for a general search technology and show that its features crucially affect the equilibrium mechanism. Price posting prevails when meetings are rival, i.e., when a meeting by one buyer reduces another buyer’s meeting probability. Under price posting buyers reveal their type by sorting ex ante. Only if the meeting technology is sufficiently non-rival, price posting is not an equilibrium. Multiple buyer types then visit the same sellers who screen ex post through auctions.
Sorting vs Screening – Search Frictions and Competing Mechanisms
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.
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
International Economic Review, 2011, 52(1), pp 85-104. With M. Galenianos and G. Virag. [technical appendix] In directed search with a finite population, minimum wages improve employment but reduce output and efficiency, and reverse for unemployment benefits. Go to paper
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. Go to paper
Quarterly Journal of Economics, 2008/123(2), pp. 621-661. With A. Postlewaite. [technical appendix] In a model of social learning, the better informed (wealthier) consumers get preferential service because their consumption signals high quality to others. 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