Sorting versus screening: Search frictions and competing mechanisms

In a market where sellers compete by posting trading mechanisms, we allow for a general search technology and show that its features crucially affect the equilibrium mechanism. Price posting prevails when meetings are rival, i.e., when a meeting by one buyer reduces another buyer's meeting prob...

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Bibliographic Details
Published inJournal of economic theory Vol. 145; no. 4; pp. 1354 - 1385
Main Authors Eeckhout, Jan, Kircher, Philipp
Format Journal Article
LanguageEnglish
Published New York Elsevier Inc 01.07.2010
Elsevier
Elsevier Science Publishing Company, Inc
SeriesJournal of Economic Theory
Subjects
Auctions
Buyers
Competing Mechanism Design
Competing mechanism design Matching function Meeting function Sorting Screening Price posting Auctions
Competition
Competència econòmica
Economic theory
Economics
Equilibrium models
Friction
Market efficiency
Markets
Matching Function
Meeting Function
Meetings
Models matemàtics
New technology
Preus
Price formation
Price Posting
Price wars
Screening
Screens
Search theory
Searches
Searching
Sorting
Studies
Screening
C78
D44
Competing mechanism design
Meeting function
Auctions
D83
Price posting
Matching function
Sorting
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Summary:In a market where sellers compete by posting trading mechanisms, we allow for a general search technology and show that its features crucially affect the equilibrium mechanism. Price posting prevails when meetings are rival, i.e., when a meeting by one buyer reduces another buyer's meeting probability. Under price posting buyers reveal their type by sorting ex-ante. Only if the meeting technology is sufficiently non-rival, price posting is not an equilibrium. Multiple buyer types then visit the same sellers who screen ex-post through auctions.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0022-0531
1095-7235
DOI:10.1016/j.jet.2010.01.005