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On the game-theoretic foundations of competitive search equilibrium

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  • Manolis Galenianos
  • Philipp Kircher
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    Abstract

    We provide a unified directed search framework with general production and matching specifications that encompass most of the existing literature. We prove the existence of subgame perfect Nash equilibria in pure firm strategies in a finite version of the model. We use this result to derive a more complete characterization of the equilibrium set for the finite economy and to extend convergence results as the economy becomes large to general production and matching specifications. The latter extends the microfoundations for the standard market utility assumption used in competitive search models with a continuum of agents to new environments.

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    File URL: http://eprints.lse.ac.uk/29707/
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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 29707.

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    Date of creation: 2012
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    Publication status: Published in International Economic Review, 2012, 53(1), pp. 1-21. ISSN: 0020-6598
    Handle: RePEc:ehl:lserod:29707

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    1. Ronald P. Wolthoff, 2010. "Applications and Interviews: A Structural Analysis of Two-Sided Simultaneous Search," Working Papers tecipa-418, University of Toronto, Department of Economics.
    2. Jan Eeckhout & Philipp Kircher, 2008. "Sorting and Decentralized Price Competition," PIER Working Paper Archive 08-020, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    3. Espen R. Moen & Asa Rosen, 2007. "Incentives in competitive search equilibrium," LSE Research Online Documents on Economics 19663, London School of Economics and Political Science, LSE Library.
    4. Manolis Galenianos & Philipp Kircher, 2005. "Directed Search with Multiple Job Applications," PIER Working Paper Archive 05-022, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    5. Michael Peters, 1995. "On the Equivalence of Walrasian and Non-Walrasian Equilibria in Contract Markets: The case of Complete Contracts," GE, Growth, Math methods 9507001, EconWPA.
    6. Michael Peters, 1998. "Limits of Exact Equilibria for Capacity Constrained Sellers with costlySearch," Working Papers peters-98-01, University of Toronto, Department of Economics.
    7. Peters, Michael, 2005. "Unobservable Heterogeneity in Directed Search," Microeconomics.ca working papers peters-05-06-13-01-50-30, Vancouver School of Economics, revised 16 Oct 2009.
    8. Robert Shimer, 2001. "The Assignment of Workers to Jobs In an Economy with Coordination Frictions," NBER Working Papers 8501, National Bureau of Economic Research, Inc.
    9. Daron Acemoglu & Robert Shimer, 1999. "Efficient Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 893-928, October.
    10. Ping He & Lixin Huang & Randall Wright, 2005. "Money And Banking In Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(2), pages 637-670, 05.
    11. Athanasios Geromichalos, 2010. "Directed Search and Optimal Production," Working Papers 1016, University of California, Davis, Department of Economics.
    12. Shouyong Shi, 2008. "Directed Search for Equilibrium Wage-Tenure Contracts," Working Papers tecipa-343, University of Toronto, Department of Economics.
    13. Camera, Gabriele & Selcuk, Cemil, 2004. "Price Dispersion with Directed Search," Purdue University Economics Working Papers 1173, Purdue University, Department of Economics.
    14. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
    15. Faig Miquel & Jerez Belén, 2006. "Inflation, Prices, and Information in Competitive Search," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(1), pages 1-34, September.
    16. Barbara Petrongolo & Christopher Pissarides, 2000. "Looking into the black box: a survey of the matching function," LSE Research Online Documents on Economics 2122, London School of Economics and Political Science, LSE Library.
    17. Benoît Julien & John Kennes & Ian King, 2005. "Ex post bidding and efficient coordination unemployment," Canadian Journal of Economics, Canadian Economics Association, vol. 38(1), pages 174-193, February.
    18. 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.
    19. Philipp Kircher, 2008. "Efficiency of Simultaneous Search," PIER Working Paper Archive 08-004, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    20. Philip J. Reny, 1999. "On the Existence of Pure and Mixed Strategy Nash Equilibria in Discontinuous Games," Econometrica, Econometric Society, vol. 67(5), pages 1029-1056, September.
    21. Espen R. Moen & A Rosen, 2007. "Incentives in Competitive Search Equilibrium," CEP Discussion Papers dp0832, Centre for Economic Performance, LSE.
    22. James Albrecht & Pieter Gautier, 2004. "Equilibrium Directed Search with Multiple Applications," Econometric Society 2004 Latin American Meetings 330, Econometric Society.
    23. Benoit Julien & John Kennes & Ian King, 2000. "Bidding for Labor," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(4), pages 619-649, October.
    24. Jacquet, Nicolas L. & Tan, Serene, 2012. "Wage-vacancy contracts and coordination frictions," Journal of Economic Theory, Elsevier, vol. 147(3), pages 1064-1104.
    25. Manolis Galenianos & Philipp Kircher, 2009. "Directed search with multiple job applications," LSE Research Online Documents on Economics 29702, London School of Economics and Political Science, LSE Library.
    26. Albrecht, James & Tan, Serene & Gautier, Pieter & Vroman, Susan, 2004. "Matching with multiple applications revisited," Economics Letters, Elsevier, vol. 84(3), pages 311-314, September.
    27. Philipp Kircher, 2009. "Efficiency of simultaneous search," LSE Research Online Documents on Economics 29703, London School of Economics and Political Science, LSE Library.
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    Cited by:
    1. Philipp Kircher (University of Edinburgh), 2013. "Matching and Sorting in a Global Economy," ESE Discussion Papers 227, Edinburgh School of Economics, University of Edinburgh.
    2. Benjamin Lester (Federal Reserve Bank of Philadelphia), Ludo Visschers (The University of Edinburgh & Universidad Carlos III, Madrid), Ronald Wolthoff (University of Toronto), 2014. "Meeting Technologies and Optimal Trading. Mechanisms in Competitive Search Markets," ESE Discussion Papers 242, Edinburgh School of Economics, University of Edinburgh.
    3. Ronald Wolthoff & Ludo Visschers & Benjamin Lester, 2014. "Meeting Technologies and Optimal Trading Mechanisms in Competitive Search Marks," 2014 Meeting Papers 188, Society for Economic Dynamics.
    4. Bi, Sheng & Langot, François, 2014. "Search and Retirement under Asymmetric Information," IZA Discussion Papers 8288, Institute for the Study of Labor (IZA).

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