Search at the Margin
Jose Carrasco () and
Lones Smith ()
American Economic Review, 2017, vol. 107, issue 10, 3146-81
We extend search theory to multiple indivisible units and perfectly divisible assets, solving them respectively with induction and recursion. Buyer demands and prices are random, and the seller can partially exercise orders. With divisible assets, the Bellman value function is increasing and strictly concave, and the optimal reservation price falls in the position, reflecting increasing holding costs (opportunity cost of delaying optionality for inframarginal units). The marginal value exists, and is strictly convex with a falling purchase cap density. Our model is amenable to price-quantity bargaining; e.g., greater buyer bargaining power is tantamount to greater search frictions.
JEL-codes: C61 C78 D25 D83 G31 (search for similar items in EconPapers)
Note: DOI: 10.1257/aer.20151579
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
https://www.aeaweb.org/articles/attachments?retrie ... Z3UUq2ESssinMbOv5w1Y (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:107:y:2017:i:10:p:3146-81
Ordering information: This journal article can be ordered from
Access Statistics for this article
American Economic Review is currently edited by Esther Duflo
More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().