Working Paper: NBER ID: w23884
Authors: Randall Wright; Philipp Kircher; Benoit Julen; Veronica Guerrieri
Abstract: This essay surveys the literature on directed/competitive search, covering theory and applications in, e.g., labor, housing and monetary economics. These models share features with traditional search theory, yet differ in important ways. They share features with general equilibrium theory, but with explicit frictions. Equilibria are typically efficient, in part because markets price goods plus the time required to get them. The approach is tractable and arguably realistic. Results are presented for finite and large economies. Private information and sorting with heterogeneity are analyzed. Some evidence is discussed. While emphasizing issues and applications, we also provide several hard-to-find technical results.
Keywords: Directed Search; Search Theory; Market Efficiency; Labor Economics; Monetary Economics
JEL Codes: D40; E40; J30; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| directed search (C91) | efficient market outcomes (G14) |
| posting of prices and terms of trade (L11) | likelihood of meeting suitable counterparts (C78) |
| terms of trade (F14) | allocation of resources in the market (D61) |
| favorable terms posted by sellers (F14) | probability of transaction success (C69) |
| strategic posting of terms (C78) | better matching and resource allocation (C78) |
| directed search models internalize search externalities (D83) | improved market efficiency (G14) |