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Sorting versus screening: search frictions and competing mechanisms

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  • Jan Eeckhout
  • Philipp Kircher

Abstract

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.

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File URL: http://eprints.lse.ac.uk/29704/
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Bibliographic Info

Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 29704.

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Date of creation: Jul 2010
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Publication status: Published in Journal of Economic Theory, July, 2010, 145(4), pp. 1354-1385. ISSN: 1095-7235
Handle: RePEc:ehl:lserod:29704

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Keywords: Competing mechanism design; Matching function; Meeting function; Sorting; Screening; Price posting; Auctions;

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References

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Citations

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Cited by:
  1. Matthew Doyle & Jacob Wong, 2008. "Wage Posting Without Full Commitment," School of Economics Working Papers 2008-01, University of Adelaide, School of Economics.
  2. James Albrecht, Pieter Gautier, Susan Vroman, 2013. "Efficient Entry in Competing Auctions," Working Papers gueconwpa~13-13-05, Georgetown University, Department of Economics.
  3. Moscarini, Giuseppe & Wright, Randall, 2010. "Introduction to Search Theory and Applications," Journal of Economic Theory, Elsevier, vol. 145(4), pages 1319-1324, July.
  4. Jacquet, Nicolas L. & Tan, Serene, 2012. "Wage-vacancy contracts and coordination frictions," Journal of Economic Theory, Elsevier, vol. 147(3), pages 1064-1104.
  5. Gautier, Pieter A. & Holzner, Christian, 2013. "Simultaneous search and network efficiency," Munich Reprints in Economics 20321, University of Munich, Department of Economics.
  6. Damianov, Damian, 2008. "Seller Competition by Mechanism Design," MPRA Paper 9348, University Library of Munich, Germany.
  7. James Albrecht, 2013. "Efficient Entry in Competitive Search with Nonrival Meetings and Asymmetric Information," 2013 Meeting Papers 602, Society for Economic Dynamics.
  8. Selcuk, Cemil, 2011. "Trading Mechanism Selection with Directed Search when Buyers are Risk Averse," MPRA Paper 36224, University Library of Munich, Germany.
  9. Selcuk, Cemil, 2011. "Trading mechanism selection with budget constraints," MPRA Paper 36227, University Library of Munich, Germany.

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