(De)Regulation and Market Thickness
Regulation is a set of constraints imposed on transactions between buyers and sellers. We introduce a dynamic frictional matching model with horizontal differentiation and nontransferable utility in which a regulator determines permissible transactions. We show the existence and uniqueness of a market equilibrium for any level of regulation and characterize the regulatorâ€™s optimal choice of regulatory environment. We argue that in â€˜thinâ€™, markets, regulation can correct market failure arising from mismatch between buyers and sellers. However, in â€˜thickâ€™ markets, deregulation is optimal, as a regulator can rely on market participantsâ€™ equilibrium behavior instead of explicit constraints on economic activities.
|Date of creation:||06 Sep 2013|
|Date of revision:|
|Contact details of provider:|| Postal: Houston TX 77023|
Web page: http://www.uh.edu/class/economics/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gianni De Fraja & Jozsef Sakovics, 1999.
"Walras Retrouve: Decentralized Trading Mechanisms and the Competitive Price,"
ESE Discussion Papers
36, Edinburgh School of Economics, University of Edinburgh.
- Gianni De Fraja & Jozsef Sakovics, 2001. "Walras Retrouve: Decentralized Trading Mechanisms and the Competitive Price," Journal of Political Economy, University of Chicago Press, vol. 109(4), pages 842-863, August.
- Gale, Douglas M, 1986. "Bargaining and Competition Part I: Characterization," Econometrica, Econometric Society, vol. 54(4), pages 785-806, July.
- Stephan Lauermann & Georg Nöldeke, 2012. "Stable Marriages and Search Frictions," Working papers 2012/10, Faculty of Business and Economics - University of Basel.
- Stephan Lauermann, 2013.
"Dynamic Matching and Bargaining Games: A General Approach,"
American Economic Review,
American Economic Association, vol. 103(2), pages 663-89, April.
- Max Planck Institute & Stephan Lauermann, 2007. "Dynamic Matching and Bargaining Games: A General Approach," 2007 Meeting Papers 269, Society for Economic Dynamics.
- Lauermann, Stephan, 2011. "Dynamic matching and bargaining games: A general approach," MPRA Paper 31717, University Library of Munich, Germany.
- Sattinger, Michael, 1995. "Search and the Efficient Assignment of Workers to Jobs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(2), pages 283-302, May.
- Rubinstein, Ariel & Wolinsky, Asher, 1985.
"Equilibrium in a Market with Sequential Bargaining,"
Econometric Society, vol. 53(5), pages 1133-50, September.
- Arial Rubinstein & Asher Wolinsky, 1985. "Equilibrium in a Market with Sequential Bargaining," Levine's Working Paper Archive 623, David K. Levine.
- Ken Burdett & Melvyn G. Coles, 1997. "Marriage and Class," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 141-168.
- Mark Satterthwaite & Artyom Shneyerov, 2007.
"Dynamic Matching, Two-Sided Incomplete Information, and Participation Costs: Existence and Convergence to Perfect Competition,"
Econometric Society, vol. 75(1), pages 155-200, 01.
- Satterthwaite, Mark & Shneyerov, Art, 2004. "Dynamic Matching,Two-sided Incomplete Information, and Participation Costs: Existence and Convergence to Perfect Competition," Microeconomics.ca working papers shneyerov-04-12-17-02-54-, Vancouver School of Economics, revised 17 Dec 2004.
- Jan Eeckhout, 1996.
"Bilateral Search and Vertical Heterogeneity,"
STICERD - Theoretical Economics Paper Series
315, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Shimer, R. & Smith, L., 1997.
"Assortative Matching and Search,"
97-2b, Massachusetts Institute of Technology (MIT), Department of Economics.
- Simon Clark, 2007. "Matching and Sorting when Like Attracts Like," ESE Discussion Papers 171, Edinburgh School of Economics, University of Edinburgh.
- Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
- Michael M. Knetter & Matthew J. Slaughter, 2001. "Measuring Product-Market Integration," NBER Chapters, in: Topics in Empirical International Economics: A Festschrift in Honor of Robert E. Lipsey, pages 15-46 National Bureau of Economic Research, Inc.
- Ausubel, Lawrence M & Deneckere, Raymond J, 1993. "A Generalized Theorem of the Maximum," Economic Theory, Springer, vol. 3(1), pages 99-107, January.
- Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, Elsevier.
- George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
- Alain Delacroix & Shouyong Shi, 2012.
"Pricing and Signaling with Frictions,"
tecipa-455, University of Toronto, Department of Economics.
- Adachi, Hiroyuki, 2003. "A search model of two-sided matching under nontransferable utility," Journal of Economic Theory, Elsevier, vol. 113(2), pages 182-198, December.
- Dirk Hofmann & Salmai Qari, 2011. "The Law of Attraction: Bilateral Search and Horizontal Heterogeneity," SFB 649 Discussion Papers SFB649DP2011-017, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
- Arial Rubinstein & Asher Wolinsky, 1990. "Decentralized Trading, Strategic Behaviour and the Walrasian Outcome," Levine's Working Paper Archive 622, David K. Levine.
- Baron, David P., 1989. "Design of regulatory mechanisms and institutions," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 24, pages 1347-1447 Elsevier.
- Ariel Rubinstein & Asher Wolinsky, 1990. "Decentralized Trading, Strategic Behaviour and the Walrasian Outcome," Review of Economic Studies, Oxford University Press, vol. 57(1), pages 63-78.
When requesting a correction, please mention this item's handle: RePEc:hou:wpaper:2013-252-38. 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: (Dietrich Vollrath)
If references are entirely missing, you can add them using this form.