On the Segmentation of Markets

Nicolas L. Jacquet () and Serene Tan ()
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Nicolas L. Jacquet: School of Economics, Singapore Management University
Serene Tan: Department of Economics, National University of Singapore

No 18-2007, Working Papers from Singapore Management University, School of Economics

Abstract: This paper endogenizes the market structure of an economy with heterogeneous agents who want to form bilateral matches in the presence of search frictions and when utility is non-transferable. We depart from standard matching models where all agents are assumed to be in a unique meeting place by assuming the existence of in?nitely many meeting places and allowing each agent to choose which meeting place to be in. The market is thus allowed to be segmented into di¤erent meeting places, and agents not only get to choose who to match with, but also who they meet with. We show that in equilibrium all market structures feature perfect segmentation where agents match with the ?rst person they meet. All these market structures have the same matching pattern, implying that the value of search to each agent is the same. Although perfect assortative matching cannot be obtained in equilibrium, the degree of assortativeness is nevertheless greater than in standard models.

Keywords: search; matching; segmentation; market structure (search for similar items in EconPapers)
JEL-codes: J42 D83 (search for similar items in EconPapers)
Date: 2007-04
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Published in SMU Economics and Statistics Working Paper Series

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