Efficient Dynamic Matching with Costly Search
This paper considers a frictional market where buyers and sellers, with unit demand and supply, search for trading opportunities. The analysis focuses on explicit search frictions, allows for two-sided incomplete information, and puts no restriction on agent heterogeneity. In this context, a non-trivial, full trade search equilibrium is shown to exist, equilibria are characterized as the values that satisfy the first order conditions for a non-linear planner’s (optimization) problem, and necessary and sufficient conditions are provided for the existence of efficient search equilibria under complete information. These results fully generalize to the two-sided incomplete information setting, under an additive separability condition.
|Date of creation:||Oct 2010|
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