Equivalence of canonical matching models

John Kennes, Daniel le Maire and Sebastian T. Roelsgaard

Games and Economic Behavior, 2020, vol. 124, issue C, 169-182

Abstract: This paper offers expected revenue and pricing equivalence results for canonical matching models. The equivalence of these models is centered on the assumption that there are large numbers of buyers and sellers, and the contact decisions of buyers to sellers are made independently. Therefore, the distribution of buyers to sellers is approximated by the Poisson distribution. The list of canonical matching models includes the models developed by Burdett and Judd (1983), Shimer (2005), and McAfee (1993). In the Burdett and Judd model, buyers post prices and the equilibrium features price dispersion because identical buyers play mixed strategies. In the Shimer model, sellers post a vector of prices corresponding to different buyer types. In equilibrium, all identical buyers pay the same price. In the McAfee model, equilibrium pricing is determined by simple second price auctions. McAfee's model also features price dispersion because the number of bidders at each auction is stochastic.

Keywords: Directed search; Price dispersion; Competing auctions; Poisson distribution (search for similar items in EconPapers)
JEL-codes: D47 D83 J64 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Equivalence of Canonical Matching Models (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:124:y:2020:i:c:p:169-182

DOI: 10.1016/j.geb.2020.08.002

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