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On the Segmentation of Markets

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  • Nicolas L. Jacquet

    (SMU)

  • Serene Tan

Abstract

This paper endogenizes the market structure of an economy with heterogeneous agents who want to form bilateral matches in the presence of search frictions and when utility is non-transferable. We depart from standard matching models where all agents are assumed to be in a unique meeting place by assuming the existence of infinitely many meeting places and allowing each agent to choose which meeting place to be in. The market is thus allowed to be segmented into dierent meeting places, and agents not only get to choose who to match with, but also who they meet with. We show that in equilibrium all market structures feature perfect segmentation where agents match with the rst person they meet. All these market structures have the same matching pattern, implying that the value of search to each agent is the same. Although perfect assortative matching cannot be obtained in equilibrium, the degree of assortativeness is nevertheless greater than in standard models.

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Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Labor Economics Working Papers with number 22449.

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Date of creation: Jan 2007
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Handle: RePEc:eab:laborw:22449

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Related research

Keywords: search; matching; segmentation; market structure;

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References

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  1. Hosios, Arthur J, 1990. "Factor Market Search and the Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(2), pages 325-55, April.
  2. Coen N. Teulings & Pieter A. Gautier, 2004. "The Right Man for the Job," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 71(2), pages 553-580, 04.
  3. Gautam Bose, 2003. "Endogenous market segmentation with heterogeneous agents," Economic Theory, Springer, Springer, vol. 22(2), pages 457-467, 09.
  4. Ettore Damiano & Hao Li, 2007. "Price discrimination and efficient matching," Economic Theory, Springer, Springer, vol. 30(2), pages 243-263, February.
  5. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1988. "The Structure of Simple General Equilibrium Models with Frictional Unemployment," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(6), pages 1267-93, December.
  6. Jan Eeckhout, 1996. "Bilateral Search and Vertical Heterogeneity," STICERD - Theoretical Economics Paper Series, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE /1996/315, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  7. Kevin Lang & Michael Manove & William T. Dickens, 2005. "Racial Discrimination in Labor Markets with Posted Wage Offers," American Economic Review, American Economic Association, American Economic Association, vol. 95(4), pages 1327-1340, September.
  8. Uren Lawrence, 2006. "The Allocation of Labor and Endogenous Search Decisions," The B.E. Journal of Macroeconomics, De Gruyter, De Gruyter, vol. 6(1), pages 1-31, June.
  9. Dale T. Mortensen & Randall Wright, 2002. "Competitive Pricing and Efficiency in Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 1-20, February.
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Cited by:
  1. Jeremy Greenwood & Philipp Kircher & Cezar Santos & Michele Tertilt, 2013. "An Equilibrium Model of the African HIV/AIDS Epidemic," Economie d'Avant Garde Research Reports, Economie d'Avant Garde 20, Economie d'Avant Garde.
  2. Friedrich Poeschel, 2013. "Assortative matching through signals," 2013 Papers, Job Market Papers ppo178, Job Market Papers.
  3. Andrey Fradkin, 2012. "Do Online Marketplaces Become More Efficient Over Time?," Working Papers, NET Institute 12-24, NET Institute.
  4. Gautier, Pieter A. & Svarer, Michael & Teulings, Coen N., 2010. "Marriage and the city: Search frictions and sorting of singles," Journal of Urban Economics, Elsevier, vol. 67(2), pages 206-218, March.
  5. Marco Francesconi & Mich�le Belot, 2011. "Dating Preferences and Meeting Opportunities in Mate Choice Decisions," Economics Discussion Papers, University of Essex, Department of Economics 702, University of Essex, Department of Economics.
  6. Guillaume Rocheteau & Pierre-Olivier Weill, 2011. "Liquidity in frictional asset markets," Working Paper 1105, Federal Reserve Bank of Cleveland.
  7. Masami Imai, 2008. "Crowding-Out Effects of a Government-Owned Depository Institution: Evidence from a Natural Experiment in Japan," Wesleyan Economics Working Papers 2008-003, Wesleyan University, Department of Economics.

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