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Sorting versus screening: search frictions and competing mechanisms

Listed author(s):
  • Jan Eeckhout
  • Philipp Kircher

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://eprints.lse.ac.uk/29704/
File Function: Open access version.
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Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 29704.

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Date of creation: Jul 2010
Publication status: Published in Journal of Economic Theory, July, 2010, 145(4), pp. 1354-1385. ISSN: 1095-7235
Handle: RePEc:ehl:lserod:29704
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  2. James Albrecht & Pieter Gautier & Susan Vroman, 2003. "Equilibrium Directed Search with Multiple Applications," Tinbergen Institute Discussion Papers 03-004/3, Tinbergen Institute, revised 14 Feb 2004.
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  27. Michael Peters, 1997. "On the Equivalence of Walrasian and Non-Walrasian Equilibria in Contract Markets: The Case of Complete Contracts," Review of Economic Studies, Oxford University Press, vol. 64(2), pages 241-264.
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