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The Law of Attraction: Bilateral Search and Horizontal Heterogeneity

  • Dirk Hofmann
  • Salmai Qari

We study a matching model with heterogeneous agents, nontransferable utility and search frictions. Agents differ along a horizontal dimension (e.g. taste) and a vertical dimension (e.g. income). Agents’ preferences coincide only in the vertical dimension. This approach introduces individual preferences in this literature as seems suitable in applications like labor markets (e.g. regional preferences). We analyze how the notion of assortativeness generalizes to integration or segregation outcomes depending on search frictions. Contrary to results from the purely vertical analysis, here, agents continuously adjust their reservation utility strategies to changing search frictions. The model is easily generalizable in the utility specification, the distribution of taste-related payoffs and the number of vertical types. Extreme utility specifications can be treated as a case of horizontal heterogeneity only.

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Paper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2011-017.

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Length: 47 pages
Date of creation: Mar 2011
Date of revision:
Handle: RePEc:hum:wpaper:sfb649dp2011-017
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  1. Wolfgang Karl Härdle & Brenda López Cabrera & Ostap Okhrin & Weining Wang, 2011. "Localising temperature risk," SFB 649 Discussion Papers SFB649DP2011-001, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  2. Till Strohsal & Enzo Weber, 2011. "Mean-Variance Cointegration and the Expectations Hypothesis," SFB 649 Discussion Papers SFB649DP2011-007, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  3. Wolfgang Karl Hardle and Maria Osipenko, 2012. "Spatial Risk Premium on Weather Derivatives and Hedging Weather Exposure in Electricity," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
  4. Lydia Mechtenberg & Johannes Münster, 2011. "A strategic mediator who is biased into the same direction as the expert can improve information transmission," SFB 649 Discussion Papers SFB649DP2011-012, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  5. Shuzhuan Zheng & Lijian Yang & Wolfgang Karl Härdle, 2011. "A Confidence Corridor for Sparse Longitudinal Data Curves," SFB 649 Discussion Papers SFB649DP2011-002, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  6. Fehr, Dietmar & Schmid, Julia, 2014. "Exclusion in the all-pay auction: An experimental investigation," Discussion Papers, Research Unit: Market Behavior SP II 2014-206, Social Science Research Center Berlin (WZB).
  7. Lu Lin & Feng Li & Lixing Zhu & Wolfgang Karl Härdle, 2011. "Mean Volatility Regressions," SFB 649 Discussion Papers SFB649DP2011-003, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  8. Rong Liu & Lijian Yang & Wolfgang K. Härdle, 2013. "Oracally Efficient Two-Step Estimation of Generalized Additive Model," Journal of the American Statistical Association, Taylor & Francis Journals, vol. 108(502), pages 619-631, June.
  9. Esra Akdeniz Duran & Mengmeng Guo & Wolfgang Karl Härdle, 2011. "A Confidence Corridor for Expectile Functions," SFB 649 Discussion Papers SFB649DP2011-004, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  10. Akdeniz Duran, Esra & Härdle, Wolfgang Karl & Osipenko, Maria, 2012. "Difference based ridge and Liu type estimators in semiparametric regression models," Journal of Multivariate Analysis, Elsevier, vol. 105(1), pages 164-175.
  11. Wolfgang Karl Härdle & Vladimir Spokoiny & Weining Wang, 2011. "Local Quantile Regression," SFB 649 Discussion Papers SFB649DP2011-005, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  12. Lones Smith, 2006. "The Marriage Model with Search Frictions," Journal of Political Economy, University of Chicago Press, vol. 114(6), pages 1124-1146, December.
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