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A Dynamic Equilibrium Model of Search


  • Michele Boldrin


We study a general equilibrium model where agents search for production and trading opportunities, that generalizes the existing literature by considering a large number of differentiated commodities and agents with idiosyncratic tastes. Thus, agents must chose nontrivial exchange as well as production strategies. We consider decreasing, constant, and increasing returns to scale in the matching techonoloogy, and characterize the circumstances under which there exist multiple steady state equilibria, or multiple dynamic equilibria for given initial conditions. We also characterize the existence of dynamic equilibria that are limit cycles. Equilibria are not generally optimal, and when multiple equilibria coexist they may be ranked. Pareto optimal allocations are also described and contrasted to those that obtain in equilibrium. We analyze comparative statics and find that certain intuitive results do not necessarily hold without restrictions on the stochastic structure.

Suggested Citation

  • Michele Boldrin, 1991. "A Dynamic Equilibrium Model of Search," Discussion Papers 930, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  • Handle: RePEc:nwu:cmsems:930

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    References listed on IDEAS

    1. Krugman, Paul, 1980. "Vehicle Currencies and the Structure of International Exchange," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 12(3), pages 513-526, August.
    2. Lopez, Robert Sabatino, 1951. "The Dollar of the Middle Ages," The Journal of Economic History, Cambridge University Press, vol. 11(03), pages 209-234, June.
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    4. Nobuhiro Kiyotaki & Randall Wright, 1990. "Search for a Theory of Money," NBER Working Papers 3482, National Bureau of Economic Research, Inc.
    5. Kiyotaki, Nobuhiro & Wright, Randall, 1991. "A contribution to the pure theory of money," Journal of Economic Theory, Elsevier, vol. 53(2), pages 215-235, April.
    6. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-954, August.
    7. Lucas, Robert E, Jr, 1986. "Adaptive Behavior and Economic Theory," The Journal of Business, University of Chicago Press, vol. 59(4), pages 401-426, October.
    8. Jones, Robert A, 1976. "The Origin and Development of Media of Exchange," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 757-775, August.
    9. Kandori, Michihiro & Mailath, George J & Rob, Rafael, 1993. "Learning, Mutation, and Long Run Equilibria in Games," Econometrica, Econometric Society, vol. 61(1), pages 29-56, January.
    10. Gilboa, Itzhak & Matsui, Akihiko, 1991. "Social Stability and Equilibrium," Econometrica, Econometric Society, vol. 59(3), pages 859-867, May.
    11. Paul R. Krugman, 1984. "The International Role of the Dollar: Theory and Prospect," NBER Chapters,in: Exchange Rate Theory and Practice, pages 261-278 National Bureau of Economic Research, Inc.
    12. John F. O. Bilson & Richard C. Marston, 1984. "Exchange Rate Theory and Practice," NBER Books, National Bureau of Economic Research, Inc, number bils84-1, January.
    13. Oh, Seonghwan, 1989. "A theory of a generally acceptable medium of exchange and barter," Journal of Monetary Economics, Elsevier, vol. 23(1), pages 101-119, January.
    14. Marimon, Ramon & McGrattan, Ellen & Sargent, Thomas J., 1990. "Money as a medium of exchange in an economy with artificially intelligent agents," Journal of Economic Dynamics and Control, Elsevier, vol. 14(2), pages 329-373, May.
    15. Matsui, Akihiko, 1992. "Best response dynamics and socially stable strategies," Journal of Economic Theory, Elsevier, vol. 57(2), pages 343-362, August.
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    Cited by:

    1. Ricardo A. Lagos, "undated". "An Alternative Approach to Market Frictions: An Application to the Market for Taxicab Rides," Penn CARESS Working Papers 058589d20e3fbe4e559adb44b, Penn Economics Department.
    2. Dale T. Mortensen, 1991. "Equilibrium Unemployment Cycles," Discussion Papers 939, Northwestern University, Center for Mathematical Studies in Economics and Management Science.

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