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Location choice in two-sided markets with indivisible agents

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  • Anderson, Robert M.
  • Ellison, Glenn
  • Fudenberg, Drew

Abstract

Consider a model of location choice by two sorts of agents, called “buyers†and “sellers†: In the first period agents simultaneously choose between two identical possible locations; following this, the agents at each location play some sort of game with the other agents there. Buyers prefer locations with fewer other buyers and more sellers, and sellers have the reverse preferences. We study the set of possible equilibrium sizes for the two markets, and show that two markets of very different sizes can co-exist even if larger markets are more efficient. This extends the analysis of Ellison and Fudenberg [2003. Quart. J. Econ. 118, 1249–1278], who ignored the constraint that the number of agents of each type in each market should be an integer, and instead analyzed the “quasi-equilibria†where agents are treated as infinitely divisible.

Suggested Citation

  • Anderson, Robert M. & Ellison, Glenn & Fudenberg, Drew, 2010. "Location choice in two-sided markets with indivisible agents," Scholarly Articles 27755298, Harvard University Department of Economics.
    • Handle: RePEc:hrv:faseco:27755298
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    Cited by:

    1. Paul Belleflamme & Eric Toulemonde, 2009. "Negative Intra-Group Externalities In Two-Sided Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 245-272, February.
    2. Moldovanu, Benny & Sela, Aner & Shi, Xianwen, 2008. "Competing auctions with endogenous quantities," Journal of Economic Theory, Elsevier, vol. 141(1), pages 1-27, July.
    3. Adamson, Jordan, 2021. "Agglomeration and the extent of the market: Theory and experiment on spatially coordinated exchange," Journal of Economic Behavior & Organization, Elsevier, vol. 190(C), pages 838-850.

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