A Dynamic Model of Search and Intermediation
University of New South Wales - Australian School of Business - School of Economics
University of Sydney - Discipline of Economics
February 9, 2010
UNSW Australian School of Business Research Paper No. 2010 ECON 04
This paper develops a dynamic model of an economy with search frictions in which homogeneous agents choose between specializing as producers or as merchants, and can change occupation at any time. Merchants operate alongside a decentralized search market and provide immediacy in trade in return for a price. Agents who know the location of a merchant have the option of paying the merchant’s price and avoiding search. We characterize equilibria in symmetric Markov strategies, and derive conditions under which merchants and their clients form a repeated relationship. We analyze welfare and explore conditions for the endogenous rise of an institution of intermediation.
Number of Pages in PDF File: 35
Keywords: Search, endogenous intermediation, repeated interaction
JEL Classification: D02, D51, D83working papers series
Date posted: February 10, 2010
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo4 in 0.516 seconds