Location Choice in Two-Sided Markets with Indivisible Agents

29 Pages Posted: 11 Jan 2005

See all articles by Robert M. Anderson

Robert M. Anderson

University of California, Berkeley - Department of Economics

Drew Fudenberg

Massachusetts Institute of Technology (MIT)

Glenn Ellison

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: January 2005

Abstract

Consider a model of location choice by two sorts of agents, called buyers and sellers: In the first period agents simultaneously choose between two identical possible locations; following this, the agents at each location play some sort of game with the other agents there. Buyers prefer locations with fewer other buyers and more sellers, and sellers have the reverse preferences. We study the set of possible equilibrium sizes for the two markets, and show that two markets of very different sizes can co-exist even if larger markets are more efficient. This extends the analysis of Ellison and Fudenberg [3] (EF), who ignored the constraint that the number of agents of each type in each market should be an integer, and instead analyzed the quasi-equilibria where agents are treated as infinitely divisible.

Suggested Citation

Anderson, Robert M. and Fudenberg, Drew and Ellison, Glenn David, Location Choice in Two-Sided Markets with Indivisible Agents (January 2005). Harvard Institute of Economic Research Discussion Paper No. 2056. Available at SSRN: https://ssrn.com/abstract=646702 or http://dx.doi.org/10.2139/ssrn.646702

Robert M. Anderson

University of California, Berkeley - Department of Economics ( email )

530 Evans Hall #3880
Berkeley, CA 94720-3880
United States

Drew Fudenberg (Contact Author)

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Glenn David Ellison

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
Room E52-380B
Cambridge, MA 02142
United States
617-253-8702 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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