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Matching Foundations

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  • Julien, Benoit
  • Kennes, John
  • King, Ian

Abstract

We compare equilibrium allocations in directed search models where prices are determined alternatively by posting and by competing auctions. Sellers' expected payoffs are higher when all sellers auction, but the difference in the payoffs decreases rapidly with market size and vanishes in the limit "large" economy. In this large economy, buyer and seller payoffs are different, but entry of both buyers and sellers is constrainedefficient. When sellers can choose whether to post prices or auction in the 2-buyer 2- seller case, then the equilibrium choice depends on whether or not sellers can commit. If both sellers can commit, then the dominant strategy equilibrium has both sellers auctioning. If neither seller can commit, then all possible combinations are equilibria.

Suggested Citation

  • Julien, Benoit & Kennes, John & King, Ian, 2000. "Matching Foundations," Working Papers 189, Department of Economics, The University of Auckland.
  • Handle: RePEc:auc:wpaper:189
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    File URL: http://hdl.handle.net/2292/189
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    Cited by:

    1. BenoƮt Julien & John Kennes & Ian King & Sephorah Mangin, 2009. "Directed search, unemployment and public policy," Canadian Journal of Economics, Canadian Economics Association, vol. 42(3), pages 956-983, August.
    2. Klaus Kultti, 2003. "About Market Structure," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 240-251, January.

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