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On the Segmentation of Markets

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  • Serene Tan
  • Nicolas L Jacquet

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 Society for Economic Dynamics in its series 2005 Meeting Papers with number 456.

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Date of creation: 2005
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Handle: RePEc:red:sed005:456

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Keywords: Segmentation; Search Frictions.;

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References

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  1. Coen N. Teulings & Pieter A. Gautier, 2000. "The Right Man for the Job," Tinbergen Institute Discussion Papers 00-038/3, Tinbergen Institute.
  2. Gautam Bose, 2003. "Endogenous market segmentation with heterogeneous agents," Economic Theory, Springer, Springer, vol. 22(2), pages 457-467, 09.
  3. 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.
  4. Ettore Damiano & Hao Li, 2007. "Price discrimination and efficient matching," Economic Theory, Springer, Springer, vol. 30(2), pages 243-263, February.
  5. Kevin Lang & Michael Manove & William T. Dickens, 2005. "Racial Discrimination in Labor Markets with Posted Wage Offers," American Economic Review, American Economic Association, vol. 95(4), pages 1327-1340, September.
  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. 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.
  8. 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, vol. 43(1), pages 1-20, February.
  9. 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.
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Cited by:
  1. Poeschel, Friedrich, 2012. "Assortative matching through signals," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62061, Verein für Socialpolitik / German Economic Association.
  2. Michèle Belot & Marco Francesconi, 2013. "Dating Preferences and Meeting Opportunities in Mate Choice Decisions," Journal of Human Resources, University of Wisconsin Press, vol. 48(2), pages 474-508.
  3. Philipp Kircher & Michele Tertilt & Cezar Santos & Jeremy Greenwood, 2013. "An Equilibrium Model of the African HIV/AIDS Epidemic," 2013 Meeting Papers, Society for Economic Dynamics 195, Society for Economic Dynamics.
  4. Guillaume Rocheteau & Pierre‐Olivier Weill, 2011. "Liquidity in Frictional Asset Markets," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 43, pages 261-282, October.
  5. Andrey Fradkin, 2012. "Do Online Marketplaces Become More Efficient Over Time?," Working Papers 12-24, NET Institute.
  6. 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.
  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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