Search Results
Working Paper
Targeted search in matching markets
We propose a parsimonious matching model where people's choice of whom to meet endogenizes the degree of randomness in matching. The analysis highlights the interaction between a productive motive, driven by the surplus attainable in a match, and a strategic motive, driven by reciprocity of interest of potential matches. We find that the interaction between these two motives differs with preferences ? vertical versus horizontal ? and that this interaction implies that preferences estimated using our model can look markedly different from those estimated using a model where the degree of ...
Working Paper
The Illusion of School Choice: Empirical Evidence from Barcelona
School choice aims to improve (1) the matching between children and schools and (2) students? educa-tional outcomes. Yet, the concern is that disadvantaged families are less able to exercise choice, which raises (3) equity concerns. The Boston mechanism (BM) is a procedure that is widely used around the world to resolve overdemands for particular schools by defining a set of priority points based on neigh-borhood and socioeconomic characteristics. The mechanism design literature has shown that under the BM, parents may not have incentives to provide their true preferences, thereby ...
Working Paper
Deconstructing Delays in Sovereign Debt Restructuring
Negotiations to restructure sovereign debt are time consuming, taking almost a decade on average to resolve. In this paper, we analyze a class of widely used complete information models of delays in sovereign debt restructuring and show that, despite superficial similarities, there are major differences across models in the driving force for equilibrium delay, the circumstances in which delay occurs, and the efficiency of the debt restructuring process. We focus on three key assumptions. First, if delay has a permanent effect on economic activity in the defaulting country, equilibrium delay ...
Working Paper
Bargaining Under Liquidity Constraints: Nash vs. Kalai in the Laboratory
We report on an experiment in which buyers and sellers engage in semi-structured bargaining in two dimensions: how much of a good the seller will produce and how much money the buyer will offer the seller in exchange. Our aim is to evaluate the empirical relevance of two axiomatic bargaining solutions, the generalized Nash bargaining solution and Kalai's proportional bargaining solution. These bargaining solutions predict different outcomes when buyers are constrained in their money holdings. We first use the case when the buyer is not liquidity constrained to estimate the bargaining power ...
Working Paper
A simple model of price dispersion
This article considers a simple stock-flow matching model with fully informed market participants. Unlike in the standard matching literature, prices are assumed to be set ex-ante. When sellers pre-commit themselves to sell their products at an advertised price, the unique equilibrium is characterized by price dispersion due to the idiosyncratic match payoffs (in a marketplace with full information). This provides new insights into the price dispersion literature, where price dispersion is commonly assumed to be generated by a costly search of uninformed buyers.
Working Paper
Marriage Market Sorting in the U.S.
We examine shifts in the U.S. marriage market, assessing how online dating, demographic changes and evolving societal norms influence mate choice and broader sorting trends. Using a targeted search model, we analyze mate selection based on factors such as education, age, race, income and skill. Intriguingly, despite the rise of online dating, preferences, mate choice and overall sorting patterns showed negligible change from 2008 to 2021. However, a longer historical view from 1960 to 2020 reveals a trend toward preferences for similarity, particularly concerning income, education and skills. ...
Working Paper
Why Rent When You Can Buy?
Using a model with bilateral trades, we explain why agents prefer to rent the goods they can afford to buy. Absent bilateral trading frictions, renting has no role even with uncertainty about future valuations. With pairwise meetings, agents prefer to sell (or buy) durable goods whenever they have little doubt on the future value of the good. As uncertainty grows, renting becomes more prevalent. Pairwise matching alone is sufficient to explain why agents prefer to rent, and there is no need to introduce random matching, information asymmetries, or other market frictions.
Working Paper
A theory of targeted search
We present a theory of targeted search, where people with a finite information processing capacity search for a match. Our theory explicitly accounts for both the quantity and the quality of matches. It delivers a unique equilibrium that resides in between the random matching and the directed search outcomes. The equilibrium that emerges from this middle ground is inefficient relative to the constrained Pareto allocation. Our theory encompasses the outcomes of the random matching and the directed search literature as limiting cases.
Working Paper
Meeting technologies and optimal trading mechanisms in competitive search markets
In a market in which sellers compete by posting mechanisms, we allow for a general meeting technology and show that its properties crucially affect the mechanism that sellers select in equilibrium. In general, it is optimal for sellers to post an auction without a reserve price but with a fee, paid by all buyers who meet with the seller. However, we define a novel condition on meeting technologies, which we call invariance, and show that meeting fees are equal to zero if and only if this condition is satisfied. Finally, we discuss how invariance is related to other properties of meeting ...
Working Paper
Intermediation in Networks
I study intermediation in networked markets using a stochastic model of multilateral bargaining in which players compete on different routes through the network. I characterize stationary equilibrium payoffs as the fixed point of a set of intuitive value function equations and study efficiency and the impact of network structure on payoffs. There is never too little trade but there may be an inefficiency through too much trade in states where delay would be efficient. With homogeneous trade surplus the payoffs for players that are not essential to a trade opportunity go to zero as trade ...