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Uniqueness of equilibrium in directed search models

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  • Kim, Jaehong
  • Camera, Gabriele

Abstract

We study a decentralized trading model as in [7], where a finite number of heterogeneous capacity-constrained sellers compete for a finite number of homogeneous buyers, by posting prices. This “directed search” model is known to admit symmetric equilibria; yet, uniqueness has proved elusive. This study makes two contributions: a substantive contribution is to establish uniqueness of symmetric equilibrium; a methodological contribution is to develop a tool based on directional derivatives to characterize equilibrium.

Suggested Citation

  • Kim, Jaehong & Camera, Gabriele, 2014. "Uniqueness of equilibrium in directed search models," Journal of Economic Theory, Elsevier, vol. 151(C), pages 248-267.
    • Handle: RePEc:eee:jetheo:v:151:y:2014:i:c:p:248-267
    DOI: 10.1016/j.jet.2013.11.004
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    References listed on IDEAS

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    1. Manolis Galenianos & Philipp Kircher, 2012. "On The Game‐Theoretic Foundations Of Competitive Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(1), pages 1-21, February.
    2. Gabriele Camera & Cemil Selcuk, 2009. "Price Dispersion with Directed Search," Journal of the European Economic Association, MIT Press, vol. 7(6), pages 1193-1224, December.
    3. Camera, Gabriele & Kim, Jaehong, 2013. "Buyer’s equilibrium with capacity constraints and restricted mobility: A recursive approach," Economics Letters, Elsevier, vol. 118(2), pages 321-323.
    4. Peters, Michael, 2000. "Limits of Exact Equilibria for Capacity Constrained Sellers with Costly Search," Journal of Economic Theory, Elsevier, vol. 95(2), pages 139-168, December.
    5. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
    6. Philipp Kircher, 2009. "Efficiency of Simultaneous Search," Journal of Political Economy, University of Chicago Press, vol. 117(5), pages 861-913, October.
    7. Peters, Michael, 1984. "Bertrand Equilibrium with Capacity Constraints and Restricted Mobility," Econometrica, Econometric Society, vol. 52(5), pages 1117-1127, September.
    8. James D. Montgomery, 1991. "Equilibrium Wage Dispersion and Interindustry Wage Differentials," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(1), pages 163-179.
    9. Virág, Gábor, 2011. "High profit equilibria in directed search models," Games and Economic Behavior, Elsevier, vol. 71(1), pages 224-234, January.
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    Cited by:

    1. Gabriele Camera & Jaehong Kim, 2016. "Dynamic directed search," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 62(1), pages 131-154, June.
    2. Ang, Joshua Ping, 2014. "Barter, Money and Direct Search Equilibrium," MPRA Paper 95352, University Library of Munich, Germany, revised 27 Jul 2019.
    3. Camera, Gabriele & Kim, Jaehong, 2018. "Equilibrium wage rigidity in directed search," Journal of Mathematical Economics, Elsevier, vol. 78(C), pages 68-78.
    4. Peter Norman, 2017. "Matching with Frictions and Entry with Poisson Distributed Buyers and Sellers," 2017 Meeting Papers 1150, Society for Economic Dynamics.

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    More about this item

    Keywords

    Nash equilibrium; Matching; Price distribution; Search;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D39 - Microeconomics - - Distribution - - - Other
    • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other
    • E39 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Other

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