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On the Segmentation of Markets

  • Serene Tan
  • Nicolas L Jacquet

This paper endogenizes the market structure of an economy with heterogeneous agents who want to form bilateral matches in the presence of search frictions and when utility is non-transferable. We depart from standard matching models where all agents are assumed to be in a unique meeting place by assuming the existence of in?nitely many meeting places and allowing each agent to choose which meeting place to be in. The market is thus allowed to be segmented into di¤erent meeting places, and agents not only get to choose who to match with, but also who they meet with. We show that in equilibrium all market structures feature perfect segmentation where agents match with the ?rst person they meet. All these market structures have the same matching pattern, implying that the value of search to each agent is the same. Although perfect assortative matching cannot be obtained in equilibrium, the degree of assortativeness is nevertheless greater than in standard models.

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Paper provided by Society for Economic Dynamics in its series 2005 Meeting Papers with number 456.

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Date of creation: 2005
Date of revision:
Handle: RePEc:red:sed005:456
Contact details of provider: Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA
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  1. Kevin Lang & Michael Manove & William T. Dickens, 2005. "Racial Discrimination in Labor Markets with Posted Wage Offers," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-145, Boston University - Department of Economics.
  2. Eeckhout, Jan, 1999. "Bilateral Search and Vertical Heterogeneity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 869-87, November.
  3. Hosios, Arthur J, 1990. "Factor Market Search and the Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 325-55, April.
  4. Uren Lawrence, 2006. "The Allocation of Labor and Endogenous Search Decisions," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(1), pages 1-31, June.
  5. Pieter A. Gautier, 2001. "The Right Man for the Job," CESifo Working Paper Series 540, CESifo Group Munich.
  6. Ettore Damiano & Hao Li, 2007. "Price discrimination and efficient matching," Economic Theory, Springer, vol. 30(2), pages 243-263, February.
  7. Dale T. Mortensen & Randall Wright, 2002. "Competitive Pricing and Efficiency in Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 1-20, February.
  8. Gautam Bose, 2003. "Endogenous market segmentation with heterogeneous agents," Economic Theory, Springer, vol. 22(2), pages 457-467, 09.
  9. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1988. "The Structure of Simple General Equilibrium Models with Frictional Unemployment," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1267-93, December.
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