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Sorting versus screening: search frictions and competing mechanisms

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  • Eeckhout, Jan
  • Kircher, Philipp

Abstract

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.

Suggested Citation

  • Eeckhout, Jan & Kircher, Philipp, 2010. "Sorting versus screening: search frictions and competing mechanisms," LSE Research Online Documents on Economics 29704, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:29704
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    File URL: http://eprints.lse.ac.uk/29704/
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Competing mechanism design; Matching function; Meeting function; Sorting; Screening; Price posting; Auctions;

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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