Uniqueness of Equilibrium in Directed Search Models
31 Pages Posted: 23 Dec 2014
Date Written: November 24, 2013
We study a decentralized trading model as in Peters (1984), where a finite number of heterogeneous capacity-constrained sellers compete for a finite number of homogeneous buyers, by posting prices. This "directed search" model is known to admit symmetric equilibria; yet, uniqueness has proved elusive. This study makes two contributions: a substantive contribution is to establish uniqueness of symmetric equilibrium; a methodological contribution is to develop a tool based on directional derivatives to characterize equilibrium.
Keywords: Nash equilibrium, matching, price distribution, search
JEL Classification: C70, D390, D490, E390
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