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Dynamic directed search

Author

Listed:
  • Gabriele Camera

    (Chapman University
    University of Basel)

  • Jaehong Kim

    (Chapman University)

Abstract

The directed search model (Peters 52(5):1117–1127, 1984) is static; its dynamic extensions typically restrict strategies, often assuming price or match commitments. We lift such restrictions to study equilibrium when search can be directed over time, without constraints and at no cost. In equilibrium, trade frictions arise endogenously, and price commitments, if they do exist, are self-enforcing. In contrast to the typical model, there exists a continuum of equilibria that exhibit trade frictions. These equilibria support any price above the static price, including monopoly pricing in arbitrarily large markets. Dispersion in posted prices can naturally arise as temporary or permanent phenomenon despite the absence of preexisting heterogeneity.

Suggested Citation

  • 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.
    • Handle: RePEc:spr:joecth:v:62:y:2016:i:1:d:10.1007_s00199-015-0872-0
    DOI: 10.1007/s00199-015-0872-0
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    References listed on IDEAS

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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Dynamic Directed Search
      by Christian Zimmermann in NEP-DGE blog on 2015-04-12 21:14:09

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    Cited by:

    1. Petrikaite, Vaiva & Hämäläinen, Saara, 2018. "Mobility with private information and privacy suppression," CEPR Discussion Papers 12860, C.E.P.R. Discussion Papers.
    2. Gallin, Joshua & Verbrugge, Randal J., 2019. "A theory of sticky rents: Search and bargaining with incomplete information," Journal of Economic Theory, Elsevier, vol. 183(C), pages 478-519.
    3. Camera, Gabriele & Kim, Jaehong, 2018. "Equilibrium wage rigidity in directed search," Journal of Mathematical Economics, Elsevier, vol. 78(C), pages 68-78.
    4. Ayman Mnasri & Beverly Lapham, 2023. "A competitive search approach to exchange rate pass-through," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 76(1), pages 153-201, July.

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    More about this item

    Keywords

    Frictions; Matching; Price dispersion; 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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