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Bilateral Search and Vertical Heterogeneity
Author(s) -
Eeckhout Jan
Publication year - 1999
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/1468-2354.00045
Subject(s) - iterated function , separable space , matching (statistics) , mathematical economics , economics , dominance (genetics) , range (aeronautics) , mathematics , function (biology) , mathematical optimization , statistics , mathematical analysis , biochemistry , chemistry , materials science , evolutionary biology , biology , composite material , gene
Just like perfect (frictionless) matching models, a search model is proposed that is characterized by bilateral search and vertical heterogeneity. It allows for a generally specified utility function. The equilibrium allocation is unique and exists in iterated strict dominance. The model is robust with the perfect matching model as frictions disappear. Nonetheless, the equilibrium allocations are surprisingly odd. For multiplicatively separable preferences, the distributions are partitioned endogenously. And for a wide range of preferences, matching sets are naturally disconnected.