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Monotonicity, Non-Participation, and Directed Search Equilibria

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  • James Bland, Simon Loertscher

Abstract

We consider the canonical directed search framework in which sellers play pure strategies and assume that buyers play strategies that are monotone in prices, can remain inactive and choose to do so whenever their payoff from participating is zero regardless of what the other buyers do. We show that directed search equilibria, which have been the focus of the literature, are the only equilibria that satisfy these assumptions. Directed search equilibria are selected here not because buyers cannot coordinate – no such assumption is made – but because they fail to play strategies that require them to increase the demand for a seller’s good as this good becomes more expensive.

Suggested Citation

  • James Bland, Simon Loertscher, 2012. "Monotonicity, Non-Participation, and Directed Search Equilibria," Department of Economics - Working Papers Series 1147, The University of Melbourne.
    • Handle: RePEc:mlb:wpaper:1147
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    References listed on IDEAS

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    6. 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.
    7. Nejat Anbarci & Nick Feltovich, 2013. "Directed Search, Coordination Failure, And Seller Profits: An Experimental Comparison Of Posted Pricing With Single And Multiple Prices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54, pages 873-884, August.
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    Cited by:

    1. Basov, Suren & King, Ian & Uren, Lawrence, 2014. "Worker heterogeneity, the job-finding rate, and technical change," European Economic Review, Elsevier, vol. 70(C), pages 159-177.

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    More about this item

    Keywords

    Directed search; monotone strategies; directed search equilibrium.;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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