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Heterogeneity as a coordination device

Coles, M and Eeckhout, J (2000) Heterogeneity as a coordination device. UNSPECIFIED. Department of Economics and Business, Universitat Pompeu Fabra Economics Working Papers.

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Abstract

A model of directed search with a finite number of buyers and sellers is considered, where sellers compete in direct mechanisms. Buyer heterogeneity and Nash equilibrium results in perfect sorting. The restriction to complementary inputs, that the match value function Q is supermodular, in addition coordinates the sellers�?? strategies. In that case, equilibrium implements positive assortative matching, which is efficient and consistent with the stable (cooperative equilibrium) outcome. This provides a non-cooperative and decentralized solution for the Assignment Game. Conversely, if buyers are identical, no such coordination is possible, and there is a continuum of equilibria, one of which exhibits price posting, another yields competition in auctions.

Item Type: Monograph (UNSPECIFIED)
Uncontrolled Keywords: Matching; assignment game; directed search; supermodularity; truthful equilibrium
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 05 Jan 2013 20:48
Last Modified: 17 Aug 2017 18:04
URI: http://repository.essex.ac.uk/id/eprint/4880

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