The authors analyze markets where each of n buyers wants to buy one unit and each of m sellers wants to sell one or more units of an indivisible good. Sellers first set prices, then buyers choose which sellers to visit. There are equilibria where each buyer visits sellers at random and faces a positive probability of rationing when too many other buyers show up at the same location. The authors solve for equilibrium prices and other variables as functions of n and m, compare the outcome to the predictions of other models, and derive some limiting results as the economy gets large. The authors also discuss the impact of changes in capacity and show that the effects of an increase in supply can be very different depending on whether it occurs along the intensive or the extensive margin (a change in the number of units of output per seller or in the number of sellers). Among other things, this last result suggests that the standard matching function in the equilibrium search literature is misspecified. On the basis of this interpretation, the authors propose that the observed outward shift in the Beveridge curve may be explained by a shift in the firm-size distribution.
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Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number
98-9.
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
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.
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Other versions:
Julien, B. & Kennes, J. & King, I., 1998.
"Bidding for Labour,"
Discussion Papers
dp98-03, Department of Economics, Simon Fraser University.
Alain Delacroix & Shouyong Shi, 2006.
"Directed Search On The Job And The Wage Ladder,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(2), pages 651-699, 05.
[Downloadable!] (restricted)
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