Competitive Pricing and Efficiency in Search Equilibrium
نویسندگان
چکیده
We consolidate and generalize some results on price determination and ef®ciency in search equilibrium. Extending models by Rubinstein and Wolinsky and by Gale, heterogeneous buyers and sellers meet according to a general matching technology and prices are determined by a general bargaining condition. When the discount rate r and search costs converge to 0, we show that prices in all exchanges are the same and equal the competitive, market clearing, price. Given positive search costs, ef®ciency obtains iff bargaining satis®es Hosios' condition and r 0. When prices are set by third-party market makers, however, we show that search equilibrium is necessarily ef®cient.
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