IDEAS home Printed from https://ideas.repec.org/p/cda/wpaper/10-16.html
   My bibliography  Save this paper

Directed Search and Optimal Production

Author

Listed:
  • Athanasios Geromichalos

    (Department of Economics, University of California Davis)

Abstract

I consider a model of directed search in which strategic sellers advertise general trading mechanisms. A mechanism determines the number of buyers that will get served and the side payments as a function of ex post realized demand. After observing these advertisements buyers simultaneously visit exactly one seller. Each buyer?s expected utility depends on the visiting decisions of other buyers. This dependence becomes especially interesting since the buyers cannot coordinate their visiting strategies. Despite the presence of strategic interaction among the sellers all symmetric equilibria are constrained efficient but not payoff equivalent. Therefore, authorities should intervene in this type of market to redistribute surplus and not to improve efficiency. As markets grow infinitely large all equilibria yield the same profit. For the large market case I provide conditions under which only a very simple class of mechanisms is posted in equilibrium.

Suggested Citation

  • Athanasios Geromichalos, 2010. "Directed Search and Optimal Production," Working Papers 1016, University of California, Davis, Department of Economics.
  • Handle: RePEc:cda:wpaper:10-16
    as

    Download full text from publisher

    File URL: http://wp.econ.ucdavis.edu/10-16.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Acemoglu, Daron & Shimer, Robert, 1999. "Holdups and Efficiency with Search Frictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 827-849, November.
    2. Serene Tan, 2012. "Directed Search And Firm Size," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(1), pages 95-113, February.
    3. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    4. Galenianos, Manolis & Kircher, Philipp, 2009. "Directed search with multiple job applications," Journal of Economic Theory, Elsevier, vol. 144(2), pages 445-471, March.
    5. Daron Acemoglu & Robert Shimer, 1999. "Efficient Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 893-928, October.
    6. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
    7. Watanabe, Makoto, 2010. "A model of merchants," Journal of Economic Theory, Elsevier, vol. 145(5), pages 1865-1889, September.
    8. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
    9. Prescott, Edward C, 1975. "Efficiency of the Natural Rate," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1229-1236, December.
    10. Michael Peters, 1997. "A Competitive Distribution of Auctions," Review of Economic Studies, Oxford University Press, vol. 64(1), pages 97-123.
    11. Benoit Julien & John Kennes & Ian King, 2000. "Bidding for Labor," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(4), pages 619-649, October.
    12. Ricardo Lagos, 2000. "An Alternative Approach to Search Frictions," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 851-873, October.
    13. McAfee, R Preston, 1993. "Mechanism Design by Competing Sellers," Econometrica, Econometric Society, vol. 61(6), pages 1281-1312, November.
    14. Burguet, Roberto & Sakovics, Jozsef, 1999. "Imperfect Competition in Auction Designs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(1), pages 231-247, February.
    15. Lester, Benjamin, 2010. "Directed search with multi-vacancy firms," Journal of Economic Theory, Elsevier, vol. 145(6), pages 2108-2132, November.
    16. James D. Montgomery, 1991. "Equilibrium Wage Dispersion and Interindustry Wage Differentials," The Quarterly Journal of Economics, Oxford University Press, vol. 106(1), pages 163-179.
    17. Jacquet, Nicolas L. & Tan, Serene, 2012. "Wage-vacancy contracts and coordination frictions," Journal of Economic Theory, Elsevier, vol. 147(3), pages 1064-1104.
    18. Epstein, Larry G. & Peters, Michael, 1999. "A Revelation Principle for Competing Mechanisms," Journal of Economic Theory, Elsevier, vol. 88(1), pages 119-160, September.
    19. Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 279-298.
    20. Coles, Melvyn G. & Eeckhout, Jan, 2003. "Indeterminacy and directed search," Journal of Economic Theory, Elsevier, vol. 111(2), pages 265-276, August.
    21. Kevin Lang, 1991. "Persistent Wage Dispersion and Involuntary Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 106(1), pages 181-202.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Manolis Galenianos & Philipp Kircher, 2012. "On The Game‐Theoretic Foundations Of Competitive Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(1), pages 1-21, February.
    2. Leo Kaas & Philipp Kircher, 2015. "Efficient Firm Dynamics in a Frictional Labor Market," American Economic Review, American Economic Association, vol. 105(10), pages 3030-3060, October.
    3. Gomis-Porqueras Pedro & Julien Benoît & Wang Liang, 2018. "Competitive Search with Ex-post Opportunism," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 18(1), pages 1-17, January.
    4. Athanasios Geromichalos, 2012. "Unemployment Insurance and Optimal Taxation in Search Models of the Labor Market," Working Papers 1218, University of California, Davis, Department of Economics.
    5. repec:eee:jetheo:v:169:y:2017:i:c:p:453-473 is not listed on IDEAS
    6. Athanasios Geromichalos, 2015. "Unemployment Insurance and Optimal Taxation in a Search Model of the Labor Market," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(2), pages 365-380, April.
    7. Athanasios Geromichalos, 2012. "Directed Search and the Bertrand Paradox," Working Papers 1221, University of California, Davis, Department of Economics.
    8. Cai, Xiaoming & Gautier, Pieter A. & Wolthoff, Ronald P., 2017. "Search frictions, competing mechanisms and optimal market segmentation," Journal of Economic Theory, Elsevier, vol. 169(C), pages 453-473.
    9. Guerrieri, Veronica & Julien, Benoit & Kircher, Philipp & Wright, Randall, 2017. "Directed Search: A Guided Tour," CEPR Discussion Papers 12315, C.E.P.R. Discussion Papers.
    10. Virág, Gábor, 2011. "High profit equilibria in directed search models," Games and Economic Behavior, Elsevier, vol. 71(1), pages 224-234, January.
    11. Godenhielm Mats & Kultti Klaus, 2015. "Directed Search with Endogenous Capacity," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 15(2), pages 211-249, July.
    12. Seungjin Han, 2015. "Competing Mechanisms: Theory and Applications in Directed Search Markets," Department of Economics Working Papers 2015-07, McMaster University, revised May 2016.
    13. Kim, Kyungmin & Kircher, Philipp, 2013. "Efficient Competition through Cheap Talk: Competing Auctions and Competitive Search without Ex Ante Price Commitment," CEPR Discussion Papers 9785, C.E.P.R. Discussion Papers.
    14. Peter Norman, 2017. "Matching with Frictions and Entry with Poisson Distributed Buyers and Sellers," 2017 Meeting Papers 1150, Society for Economic Dynamics.
    15. Xiaoming Cai & Pieter Gautier & Ronald Wolthoff, 2015. "Inclusive versus Exclusive Markets: Search Frictions and Competing Mechanisms," Working Papers tecipa-545, University of Toronto, Department of Economics.

    More about this item

    Keywords

    directed search; efficiency; multiplicity of equilibrium;

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cda:wpaper:10-16. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Scott Dyer). General contact details of provider: http://edirc.repec.org/data/educdus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.