Efficiency of Thin and Thick Markets

32 Pages Posted: 19 Oct 2004 Last revised: 22 Jul 2010

See all articles by Li Gan

Li Gan

Texas A&M University - Department of Economics; National Bureau of Economic Research (NBER)

Qi Li

Texas A&M University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: October 2004

Abstract

In this paper, we propose a matching model to study the efficiency of thin and thick markets. Our model shows that the probabilities of matches in a thin market are significantly lower than those in a thick market. When applying our results to a job search model, it implies that, if the ratio of job candidates to job openings remains (roughly) a constant, the probability that a person can find a job is higher in a thick market than in a thin market. We apply our matching model to the U.S. academic market for new PhD economists. Consistent with the prediction of our model, a field of specialization with more job openings and more candidates has a higher probability of matching.

Suggested Citation

Gan, Li and Li, Qi, Efficiency of Thin and Thick Markets (October 2004). NBER Working Paper No. w10815. Available at SSRN: https://ssrn.com/abstract=601117

Li Gan (Contact Author)

Texas A&M University - Department of Economics ( email )

5201 University Blvd.
College Station, TX 77843-4228
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Qi Li

Texas A&M University - Department of Economics ( email )

5201 University Blvd.
College Station, TX 77843-4228
United States
979-845-7349 (Phone)

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