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Sorting versus screening: Search frictions and competing mechanisms

  • Eeckhout, Jan
  • Kircher, Philipp

In a market where sellers compete by posting trading mechanisms, we allow for a general search technology and show that its features crucially affect the equilibrium mechanism. Price posting prevails when meetings are rival, i.e., when a meeting by one buyer reduces another buyer's meeting probability. Under price posting buyers reveal their type by sorting ex-ante. Only if the meeting technology is sufficiently non-rival, price posting is not an equilibrium. Multiple buyer types then visit the same sellers who screen ex-post through auctions.

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File URL: http://www.sciencedirect.com/science/article/B6WJ3-4Y70CDJ-3/2/ace29c545090ba7c2497506e7bb233a5
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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 145 (2010)
Issue (Month): 4 (July)
Pages: 1354-1385

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Handle: RePEc:eee:jetheo:v:145:y:2010:i:4:p:1354-1385
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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