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Keywords:Search theory 

Conference Paper
Search, money, and capital: a neoclassical dichotomy
Recent work has reduced the gap between search-based monetary theory and mainstream macroeconomics by incorporating into the search model some centralized markets as well as some decentralized markets where money is essential. This paper takes a further step toward this integration by introducing labor, capital, and neoclassical firms. The resulting framework nests a search-theoretic monetary model and a standard neoclassical growth model as special cases.
AUTHORS: Wright, Randall; Aruoba, S. Boragan
DATE: 2003

Working Paper
Money and capital: a quantitative analysis
We study the effects of money (anticipated inflation) on capital formation. Previous papers on this topic adopt reduced-form approaches, putting money in the utility function or imposing cash in advance, but use otherwise frictionless models. We follow a literature that is more explicit about the frictions making money essential. This introduces several new elements, including a two-sector structure with centralized and decentralized markets, stochastic trading opportunities, and bargaining. We show how these elements matter qualitatively and quantitatively. Our numerical results differ from findings in the reduced-form literature. The analysis reduces the previously large gap between mainstream macro and monetary theory.
AUTHORS: Aruoba, S. Boragan; Waller, Christopher J.; Wright, Randall
DATE: 2009

Working Paper
Screening and adverse selection in frictional markets
We incorporate a search-theoretic model of imperfect competition into an otherwise standard model of asymmetric information with unrestricted contracts. We develop a methodology that allows for a sharp analytical characterization of the unique equilibrium and then use this characterization to explore the interaction between adverse selection, screening, and imperfect competition. On the positive side, we show how the structure of equilibrium contracts?and, hence, the relationship between an agent?s type, the quantity he trades, and the corresponding price?is jointly determined by the severity of adverse selection and the concentration of market power. This suggests that quantifying the effects of adverse selection requires controlling for the market structure. On the normative side, we show that increasing competition and reducing informational asymmetries can be detrimental to welfare. This suggests that recent attempts to increase competition and reduce opacity in markets that suffer from adverse selection could potentially have negative, unforeseen consequences
AUTHORS: Venkateswaran, Venky; Zetlin-Jones, Ariel; Shourideh, Ali; Lester, Benjamin
DATE: 2016-03-10

Joint-search theory: new opportunities and new frictions
Search theory routinely assumes that decisions about the acceptance/rejection of job offers (and, hence, about labor market movements between jobs or across employment states) are made by individuals acting in isolation. In reality, the vast majority of workers are somewhat tied to their partners - in couples and families - and decisions are made jointly. This paper studies, from a theoretical viewpoint, the joint job-search and location problem of a household formed by a couple (e.g., husband and wife) who perfectly pools income. The objective of the exercise, very much in the spirit of standard search theory, is to characterize the reservation wage behavior of the couple and compare it to the single-agent search model in order to understand the ramifications of partnerships for individual labor market outcomes and wage dynamics. We focus on two main cases. First, when couples are risk averse and pool income, joint search yields new opportunities - similar to on-the-job search - relative to the single-agent search. Second, when the two spouses in a couple face job offers from multiple locations and a cost of living apart, joint search features new frictions and can lead to significantly worse outcomes than single-agent search.
AUTHORS: Guvenen, Fatih; Violante, Giovanni L.; Guler, Bulent
DATE: 2009

Liquidity in asset markets with search frictions
We develop a search-theoretic model of financial intermediation and use it to study how trading frictions affect the distribution of asset holdings, asset prices, efficiency, and standard measures of liquidity. A distinctive feature of our theory is that it allows for unrestricted asset holdings, so market participants can accommodate trading frictions by adjusting their asset positions. We show that these individual responses of asset demands constitute a fundamental feature of illiquid markets: they are a key determinant of bid-ask spreads, trade volume, and trading delays - all the dimensions of market liquidity that search-based theories seek to explain. ; This paper is an extension of Ricardo Lagos's work while he was in the Research Department of the Federal Reserve Bank of Minneapolis.
AUTHORS: Rocheteau, Guillaume; Lagos, Ricardo
DATE: 2008



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