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Journal Article

Pricing and Matching with Frictions

Authors

Publication date

01 Dec 2001

Abstract

Suppose that n buyers each want one unit and m sellers each have one or more units of a good. Sellers post prices, and then buyers choose sellers. In symmetric equilibrium, similar sellers all post one price, and buyers randomize. Hence, more or fewer buyers may arrive than a seller can accommodate. We call this frictions. We solve for prices and the endogenous matching function for finite n and m and consider the limit as n and m grow. The matching function displays decreasing returns but converges to constant returns. We argue that the standard matching function in the literature is misspecified and discuss implications for the Beveridge curve.

Published in

Journal of Political Economy

Volume and page numbers

109 , 1060 -1085

ISSN

16

Links

http://www.journals.uchicago.edu/JPE/home.html

Notes

Held online ASL - http://serlib0.essex.ac.uk/record=b1599760~S5

#519415


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