Journal of Political Economy Vol. 109 No. 5 2001
Pricing and Matching with Frictions
Abstract
Suppose that n buyers each want one unit and m sellers each have one or more units of a good. Sellers post prices, and then buyers choose sellers. In symmetric equilibrium, similar sellers all post one price, and buyers randomize. Hence, more or fewer buyers may arrive than a seller can accommodate. We call this frictions. We solve for prices and the endogenous matching function for finite n and m and consider the limit as n and m grow. The matching function displays decreasing returns but converges to constant returns. We argue that the standard matching function in the literature is misspecified and discuss implications for the Beveridge curve.
- DOI
- 10.1086/322835
- Volume
- 109
- Issue
- 5
- Pages
- 1060-1085
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref