Directed search with endogenous capacity
We consider a large market with frictions. We are in a directed search type setting, sellers are capacity constrained, post prices, and buyers contact sellers taking into account price and probability of service. We aim to endogenize the sellers' capacities. To this end we formulate a three stage game, where the sellers choose their capacity in the first stage, in the second stage sellers choose their price given the capacities, and in the third stage buyers choose which firm to visit. We analyse price formation when sellers' have different capacities. A non-existence result is introduced for linear costs. We also characterize equilibrium with free entry and increasing and convex costs. In addition we derive the matching function and the social welfare function and show that the capacity chosen under free entry is efficient.
|Date of creation:||2011|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
Web page: http://www.EconomicDynamics.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- William B. Hawkins, 2013. "Competitive Search, Efficiency, And Multiworker Firms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(1), pages 219-251, 02.
- Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
- Lester, Benjamin, 2010. "Directed search with multi-vacancy firms," Journal of Economic Theory, Elsevier, vol. 145(6), pages 2108-2132, November.
- Athanasios Geromichalos, 2010.
"Directed Search and Optimal Production,"
1016, University of California, Davis, Department of Economics.
- Selcuk, Cemil, 2012.
"Trading mechanism selection with directed search when buyers are risk averse,"
Elsevier, vol. 115(2), pages 207-210.
- Selcuk, Cemil, 2011. "Trading Mechanism Selection with Directed Search when Buyers are Risk Averse," MPRA Paper 36224, University Library of Munich, Germany.
- Klaus Kultti, 2003. "Comparison of Auctions and Posted Prices in a Finite Random Matching Model," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 159(3), pages 457-457, September.
- Kultti, Klaus, 1999.
"Equivalence of Auctions and Posted Prices,"
Games and Economic Behavior,
Elsevier, vol. 27(1), pages 106-113, April.
- McAfee, R Preston, 1993. "Mechanism Design by Competing Sellers," Econometrica, Econometric Society, vol. 61(6), pages 1281-1312, November.
- Watanabe, Makoto, 2010. "A model of merchants," Journal of Economic Theory, Elsevier, vol. 145(5), pages 1865-1889, September.
- Peters, Michael, 1991. "Ex Ante Price Offers in Matching Games Non-steady States," Econometrica, Econometric Society, vol. 59(5), pages 1425-1454, September.
When requesting a correction, please mention this item's handle: RePEc:red:sed011:1025. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann)
If references are entirely missing, you can add them using this form.