A Theory of Commerce: Competitive Search Under Private Information
We extend the concept of competitive search to an environment where, as is often common, sellers cannot observe the willingness to pay of their clients. This theoretical contribution is applied to model retail trade. We find that in equilibrium the ratio of buyers over sellers exceeds that of the first best allocation. However, a planner who faces the same informational constraints as the market and whose only policy instrument is to regulate market prices cannot improve upon the equilibrium allocation when the production technology is linear. The model we construct is quite tractable, and when inserted in a Neoclassical growth framework it is suciently rich to be taken to the data for estimation. The search parameters can be identified with data on commercial margins and the households' allocation of time.
|Date of creation:||20 Mar 2003|
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- Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
- Miquel Faig, 2001.
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Economics Working Papers
567, Department of Economics and Business, Universitat Pompeu Fabra.
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- Kiyotaki, Nobuhiro & Wright, Randall, 1993. "A Search-Theoretic Approach to Monetary Economics," American Economic Review, American Economic Association, vol. 83(1), pages 63-77, March.
- 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.
- Mortensen, Dale T, 1982. "Property Rights and Efficiency in Mating, Racing, and Related Games," American Economic Review, American Economic Association, vol. 72(5), pages 968-979, December.
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- Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 279-298.
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