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|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (416) 978-5283
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.:
- Kenneth Burdett & Shouyong Shi & Randall Wright, 1998. "Pricing with frictions," Working Papers 98-9, Federal Reserve Bank of Philadelphia.
- Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
- Shouyong Shi, 1997.
"A Divisible Search Model of Fiat Money,"
Econometric Society, vol. 65(1), pages 75-102, January.
- Miquel Faig, 2001.
"A search theory of money and commerce with Neoclassical production,"
Economics Working Papers
567, Department of Economics and Business, Universitat Pompeu Fabra.
- Miquel Faig, 2001. "A Search Theory of Money and Commerce with Neoclassical Production," Working Papers faig-01-01, University of Toronto, Department of Economics.
- Betancourt, Roger R & Gautschi, David A, 1993. "The Outputs of Retail Activities: Concepts, Measurement and Evidence from U.S. Census Data," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 294-301, May.
- 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 927-54, August.
- Moen, Espen R, 1997.
"Competitive Search Equilibrium,"
Journal of Political Economy,
University of Chicago Press, vol. 105(2), pages 385-411, April.
- Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 279-98, April.
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
- Peters, Michael, 1991. "Ex Ante Price Offers in Matching Games Non-steady States," Econometrica, Econometric Society, vol. 59(5), pages 1425-54, September.
- Mortensen, Dale T, 1982. "Property Rights and Efficiency in Mating, Racing, and Related Games," American Economic Review, American Economic Association, vol. 72(5), pages 968-79, December.
When requesting a correction, please mention this item's handle: RePEc:tor:tecipa:faig-02-01. 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: (RePEc Maintainer)
If references are entirely missing, you can add them using this form.