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.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 507 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.