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Price formation in a matching market with targeted offers

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  • Sákovics, József

Abstract

We model a market where the surpluses from seller–buyer matches are heterogeneous but common knowledge. Price setting is synchronous with search: buyers simultaneously make one personalized offer each to the seller of their choice. With impatient players efficient coordination is not possible, and both temporary and permanent mismatches occur. Nonetheless, for patient players efficient matching (with monopsony wages) is an equilibrium. The setting is inspired by a labor market for highly skilled workers, such as the academic job market, but it can be easily adapted to, for example, the housing market or Internet advertising auctions.

Suggested Citation

  • Sákovics, József, 2014. "Price formation in a matching market with targeted offers," Games and Economic Behavior, Elsevier, vol. 87(C), pages 161-177.
    • Handle: RePEc:eee:gamebe:v:87:y:2014:i:c:p:161-177
    DOI: 10.1016/j.geb.2014.05.008
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    References listed on IDEAS

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    More about this item

    Keywords

    Diamond paradox; Efficient matching; Directed search;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations

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