Nonstationary Search
نویسنده
چکیده
This paper explores equilibrium and optimal matching behavior in constant returns to scale search economies with heterogeneous agents. We show that optimal matching behavior may involve a nontrivial limit cycle, and that there may exist a continuum of cyclical perfect foresight equilibria. These results hold for a generic set of parameter values. They are due to a trading externality (Diamond 1982) that is inherent in heterogeneous agent economies. We argue that the cycles in our stripped-down model resemble business cycles. ∗The ideas in this paper were originally contained in the July 2000 version of “Matching, Search, and Heterogeneity”. The authors appreciate the comments of seminar participants at the NBER Summer Institute 2000 regarding that paper. Shimer gratefully acknowledges financial support from National Science Foundation grant SES-0079345.
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