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A theory of targeted search

Listed author(s):
  • Cheremukhin, Anton A.

    (Federal Reserve Bank of Dallas)

  • Tutino, Antonella

    (Federal Reserve Bank of Dallas)

  • Restrepo-Echavarria, Paulina

    (Ohio State University)

We present a theory of targeted search, where people with a finite information processing capacity search for a match. Our theory explicitly accounts for both the quantity and the quality of matches. It delivers a unique equilibrium that resides in between the random matching and the directed search outcomes. The equilibrium that emerges from this middle ground is inefficient relative to the constrained Pareto allocation. Our theory encompasses the outcomes of the random matching and the directed search literature as limiting cases.

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Paper provided by Federal Reserve Bank of Dallas in its series Working Papers with number 1402.

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Length: 55 pages
Date of creation: 13 Feb 2014
Handle: RePEc:fip:feddwp:1402
Contact details of provider: Web page: http://www.dallasfed.org/
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  1. Robert Shimer & Lones Smith, 2000. "Assortative Matching and Search," Econometrica, Econometric Society, vol. 68(2), pages 343-370, March.
  2. Jan Eeckhout & Philipp Kircher, 2010. "Sorting and decentralized price competition," LSE Research Online Documents on Economics 29705, London School of Economics and Political Science, LSE Library.
  3. Coles, Peter Andrew & Levine, Phillip B. & Roth, Alvin E. & Cawley, John & Niederle, Muriel & Siegfried, John J., 2010. "The Job Market for New Economists: A Market Design Perspective," Scholarly Articles 5343168, Harvard University Department of Economics.
  4. Robert Shimer & Veronica Guerrieri, 2013. "Markets with Multidimensional Private Information," 2013 Meeting Papers 210, Society for Economic Dynamics.
  5. Philipp Kircher, 2009. "Efficiency of simultaneous search," LSE Research Online Documents on Economics 29703, London School of Economics and Political Science, LSE Library.
  6. E. Glen Weyl, 2010. "A Price Theory of Multi-sided Platforms," American Economic Review, American Economic Association, vol. 100(4), pages 1642-1672, September.
  7. Jean-Charles Rochet & Jean Triole, 2002. "Platform Competition in Two Sided Markets," FMG Discussion Papers dp409, Financial Markets Group.
  8. Veronica Guerrieri & Robert Shimer & Randall Wright, 2009. "Adverse Selection in Competitive Search Equilibrium," NBER Working Papers 14915, National Bureau of Economic Research, Inc.
  9. Guido Menzio, 2007. "A Theory of Partially Directed Search," PIER Working Paper Archive 09-006, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  10. Alvn E. Roth & Tayfun Sonmez & M. Utku Unver, 2005. "Efficient Kidney Exchange: Coincidence of Wants in a Structured Market," Microeconomics 0506001, EconWPA, revised 01 Jun 2005.
  11. Ricardo Lagos, 2000. "An Alternative Approach to Search Frictions," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 851-873, October.
  12. Shouyong Shi, 2002. "A Directed Search Model of Inequality with Heterogeneous Skills and Skill-Biased Technology," Review of Economic Studies, Oxford University Press, vol. 69(2), pages 467-491.
  13. Alvin E. Roth & Elliott Peranson, 1999. "The Redesign of the Matching Market for American Physicians: Some Engineering Aspects of Economic Design," NBER Working Papers 6963, National Bureau of Economic Research, Inc.
  14. Veronica Guerrieri, 2008. "Inefficient Unemployment Dynamics under Asymmetric Information," Journal of Political Economy, University of Chicago Press, vol. 116(4), pages 667-708, 08.
  15. Pieter A. Gautier & Christian Holzner, 2011. "Simultaneous Search and Network Efficiency," CESifo Working Paper Series 3522, CESifo Group Munich.
  16. Dale Ballou, 1996. "Do Public Schools Hire the Best Applicants?," The Quarterly Journal of Economics, Oxford University Press, vol. 111(1), pages 97-133.
  17. 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.
  18. Guillaume R. Fréchette & Alvin E. Roth & M. Utku Ünver, 2007. "Unraveling yields inefficient matchings: evidence from post-season college football bowls," RAND Journal of Economics, RAND Corporation, vol. 38(4), pages 967-982, December.
  19. Sims, Christopher A., 2003. "Implications of rational inattention," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 665-690, April.
  20. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
  21. Vives, X., 1988. "Nash Equilibrium With Strategic Complementarities," UFAE and IAE Working Papers 107-88, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  22. Pissarides, C A, 1979. "Job Matchings with State Employment Agencies and Random Search," Economic Journal, Royal Economic Society, vol. 89(356), pages 818-833, December.
  23. Jason Brown & Mark Duggan & Ilyana Kuziemko & William Woolston, 2011. "How does Risk Selection Respond to Risk Adjustment? Evidence from the Medicare Advantage Program," NBER Working Papers 16977, National Bureau of Economic Research, Inc.
  24. Tayfun Sönmez & M. Utku Ünver, 2009. "Matching, Allocation, and Exchange of Discrete Resources," Boston College Working Papers in Economics 717, Boston College Department of Economics.
  25. Robert Shimer, 2001. "The Assignment of Workers to Jobs In an Economy with Coordination Frictions," NBER Working Papers 8501, National Bureau of Economic Research, Inc.
  26. Susan E. Woodward & Robert E. Hall, 2010. "Diagnosing Consumer Confusion and Sub-Optimal Shopping Effort: Theory and Mortgage-Market Evidence," NBER Working Papers 16007, National Bureau of Economic Research, Inc.
  27. Benjamin Lester, 2011. "Information and Prices with Capacity Constraints," American Economic Review, American Economic Association, vol. 101(4), pages 1591-1600, June.
  28. Robert E. Hall, 1978. "A Theory of the Natural Unemployment Rate and the Duration of Employment," NBER Working Papers 0251, National Bureau of Economic Research, Inc.
  29. 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.
  30. Dale T. Mortensen, 2005. "Wage Dispersion: Why Are Similar Workers Paid Differently?," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633191, September.
  31. Ünver, M. Utku & Sönmez, Tayfun & Roth, Alvin, 2007. "Efficient Kidney Exchange: Coincidence of Wants in a Markets with Compatibility-Based Preferences," Scholarly Articles 2562809, Harvard University Department of Economics.
  32. Gregory Lewis, 2011. "Asymmetric Information, Adverse Selection and Online Disclosure: The Case of eBay Motors," American Economic Review, American Economic Association, vol. 101(4), pages 1535-1546, June.
  33. Margaret Stevens, 2007. "New Microfoundations For The Aggregate Matching Function," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(3), pages 847-868, 08.
  34. repec:lmu:muenar:20321 is not listed on IDEAS
  35. Peter A. Diamond, 1982. "Wage Determination and Efficiency in Search Equilibrium," Review of Economic Studies, Oxford University Press, vol. 49(2), pages 217-227.
  36. Roth, Alvin E & Sotomayor, Marilda, 1989. "The College Admissions Problem Revisited," Econometrica, Econometric Society, vol. 57(3), pages 559-570, May.
  37. Axel Anderson & Lones Smith, 2010. "Dynamic Matching and Evolving Reputations," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 3-29.
  38. Gerard R. Butters, 1977. "Equilibrium Distributions of Sales and Advertising Prices," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 465-491.
  39. 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.
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