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On the Segmentation of Markets

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Author Info

  • Nicolas L. Jacquet

    ()
    (School of Economics, Singapore Management University)

  • Serene Tan

    ()
    (Department of Economics, National University of Singapore)

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 in?nitely many meeting places and allowing each agent to choose which meeting place to be in. The market is thus allowed to be segmented into di¤erent 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 Singapore Management University, School of Economics in its series Working Papers with number 18-2007.

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Length: 25 pages
Date of creation: Apr 2007
Date of revision:
Publication status: Published in SMU Economics and Statistics Working Paper Series
Handle: RePEc:siu:wpaper:18-2007

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Related research

Keywords: search; matching; segmentation; market structure;

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References

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  1. Kevin Lang & Michael Manove & William T. Dickens, 2005. "Racial Discrimination in Labor Markets with Posted Wage Offers," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-145, Boston University - Department of Economics.
  2. Jan Eeckhout, 1996. "Bilateral Search and Vertical Heterogeneity," STICERD - Theoretical Economics Paper Series /1996/315, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  3. Pieter A. Gautier, 2001. "The Right Man for the Job," CESifo Working Paper Series 540, CESifo Group Munich.
  4. 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.
  5. 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, vol. 96(6), pages 1267-93, December.
  6. Gautam Bose, 2003. "Endogenous market segmentation with heterogeneous agents," Economic Theory, Springer, vol. 22(2), pages 457-467, 09.
  7. Hosios, Arthur J, 1990. "Factor Market Search and the Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 325-55, April.
  8. Ettore Damiano & Hao Li, 2007. "Price discrimination and efficient matching," Economic Theory, Springer, vol. 30(2), pages 243-263, February.
  9. Uren Lawrence, 2006. "The Allocation of Labor and Endogenous Search Decisions," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(1), pages 1-31, June.
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Citations

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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. Andrey Fradkin, 2012. "Do Online Marketplaces Become More Efficient Over Time?," Working Papers 12-24, NET Institute.
  3. Jeremy Greenwood & Philipp Kircher & Cezar Santos & Michele Tertilt, 2013. "An Equilibrium Model of the African HIV/AIDS Epidemic," Economie d'Avant Garde Research Reports 20, Economie d'Avant Garde.
  4. Guillaume Rocheteau & Pierre-Olivier Weill, 2011. "Liquidity in frictional asset markets," Working Paper 1105, Federal Reserve Bank of Cleveland.
  5. 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.
  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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