lecture9 - Lecture 10 Search Models ECON 2130 XII - 2...

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Unformatted text preview: Lecture 10 Search Models ECON 2130 XII - 2 Finding a Trading Partner An important real-world friction is that buyers and sellers often have to find each other before they can trade. Job seekers have to search for a good match among job opportunities. Employers have to search the pool of applicants for the best match. This is also an explanation for money. ECON 2130 XII - 3 A Basic Search Model Consider an infinite-horizon model of job seekers. Consumers can be employed or unemployed. In each period, an unemployed consumer gets a job offer of wage w. w drawn from a random distribution. Can choose to accept the offer or stay unemployed. Cost of accepting offer is he might get a better offer in the future. ECON 2130 XII - 4 The Offer Distribution Suppose that offers are drawn from a distribution with cdf F ( w ). Offers are positive and bounded above by B > 0. F (0) = 0 and F ( B ) = 1. The expected offer is = B w wdF w E ) ( ] ~ [ . ) ( - = B dp p F B ECON 2130 XII - 5 Families of Distributions Consider a family of such distributions parameterized by r with cdf F ( w , r )....
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lecture9 - Lecture 10 Search Models ECON 2130 XII - 2...

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