Spatial search

Xiaoming Cai, Pieter Gautier and Ronald Wolthoff

Journal of Economic Theory, 2025, vol. 224, issue C

Abstract: This paper considers a random search model where some locations provide sellers with better chances of meeting many buyers than other locations (for example popular shopping streets or the first page of a search engine). When sellers are heterogeneous in terms of the quality of their product and/or the probability that a given buyer likes their product, it is desirable that sellers of high-quality niche products sort into the best locations (positive assortative matching, PAM). We show that this does not always happen in a decentralized market. Finally, we endogenize the location distribution and show that PAM between sellers and locations always arises in equilibrium. However, the equilibrium distribution of locations is too favorable for the sellers of high-quality, niche products.

Keywords: Search frictions; Spatial equilibrium; Sorting (search for similar items in EconPapers)
JEL-codes: C78 D44 D83 (search for similar items in EconPapers)
Date: 2025
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Related works:
Working Paper: Spatial Search (2024)
Working Paper: Spatial Search (2024)
Working Paper: Spatial Search (2024)
Working Paper: Spatial Search (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:224:y:2025:i:c:s0022053125000225

DOI: 10.1016/j.jet.2025.105976

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