Middlemen: A Directed Search Equilibrium Approach

Middlemen in Search Equilibrium

This paper shows how including divisibility of goods and productive heterogeneity leads to the emergence of middlemen in an equilibrium search environment. In the baseline model, middlemen are welfare reducing and their number increases as market frictions are reduced. When the model is extended to allow for time taken in production and increasing returns-to-scale in the market meeting technolo...

“Residual” Wage Disparity in Directed Search Equilibrium

We examine how much of the observed wage dispersion among similar workers can be explained as a consequence of a lack of coordination among employers. To do this, we construct a directed search model with homogenous workers but where firms can create either good or bad jobs, aimed at either employed or unemployed workers. Workers in our model can also sell their labor to the highest bidder. The...

Directed Search for Equilibrium Wage-Tenure Contracts

I analyze the equilibrium in a labor market where firms offer wage-tenure contracts to direct the search of employed and unemployed workers. Each applicant observes all offers and there is no coordination among individuals. Workers’ applications (as well as firms’ recruiting decisions) are optimal. This optimality requires the equilibrium to be formulated differently from the that in the litera...

Equilibrium Directed Search with Multiple Applications

In this paper, we construct an equilibrium model of directed search in a large labor market in which unemployed workers make multiple job applications. Speci…cally, we consider a matching process in which job seekers, observing the wages posted at all vacancies, send their applications to the vacancies that they …nd most attractive. At the same time, each vacancy, when it chooses its wage posti...

Competitive Equilibrium with Middlemen: An Empirical Study