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High profit equilibria in directed search models


  • Virág, Gábor


We consider a model of directed search where the sellers are allowed to post mechanisms with entry fees. Regardless of the number of buyers and sellers, the sellers are able to extract all the surplus of the buyers by introducing entry fees and making price schedules positively sloped in the number of buyers arriving to their shops. This is in contrast to results that are achieved for large markets under the assumption that sellers cannot influence the utility of any particular buyer (market utility assumption), in which case buyers obtain strictly positive rents. If there is a bound on the prices or on the entry fees that can be charged, then the equilibrium with full rent extraction does not exist any more, and the market utility assumption is restored for large markets.

Suggested Citation

  • Virág, Gábor, 2011. "High profit equilibria in directed search models," Games and Economic Behavior, Elsevier, vol. 71(1), pages 224-234, January.
  • Handle: RePEc:eee:gamebe:v:71:y:2011:i:1:p:224-234

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    References listed on IDEAS

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    10. Michael Peters, 1997. "A Competitive Distribution of Auctions," Review of Economic Studies, Oxford University Press, vol. 64(1), pages 97-123.
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    Cited by:

    1. Kim, Jaehong & Camera, Gabriele, 2014. "Uniqueness of equilibrium in directed search models," Journal of Economic Theory, Elsevier, vol. 151(C), pages 248-267.
    2. repec:eee:gamebe:v:103:y:2017:i:c:p:262-285 is not listed on IDEAS
    3. Camera, Gabriele & Kim, Jaehong, 2013. "Buyer’s equilibrium with capacity constraints and restricted mobility: A recursive approach," Economics Letters, Elsevier, vol. 118(2), pages 321-323.
    4. Guerrieri, Veronica & Julien, Benoit & Kircher, Philipp & Wright, Randall, 2017. "Directed Search: A Guided Tour," CEPR Discussion Papers 12315, C.E.P.R. Discussion Papers.


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