Efficiency in Search and Matching Models: A Generalized Hosios Condition

Benoit Julien and Sephorah Mangin

No 28-16, Monash Economics Working Papers from Monash University, Department of Economics

Abstract: This paper generalizes the well-known Hosios (1990) efficiency condition to dynamic search and matching environments where the expected match output depends on the market tightness. Such environments give rise to a novel externality – the output externality – which may be either positive or negative. The generalized Hosios condition is simple: entry is constrained efficient when buyers’ surplus share equals the matching elasticity plus the surplus elasticity (i.e. the elasticity of the expected joint match surplus with respect to buyers). This intuitive condition captures both the standard externalities generated by the frictional matching process and the output externality.

Keywords: constrained efficiency; search and matching; directed search; competitive search; Nash bargaining; Hosios condition (search for similar items in EconPapers)
JEL-codes: C78 D83 E24 J64 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2016-11
New Economics Papers: this item is included in nep-dge, nep-gth, nep-mac and nep-mic
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Citations: View citations in EconPapers (15)

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Journal Article: Efficiency in search and matching models: A generalized Hosios condition (2021)
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