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Dynamic directed random matching

Darrell Duffie, Lei Qiao and Yeneng Sun

Journal of Economic Theory, 2018, vol. 174, issue C, 124-183

Abstract: We develop a general and unified model in which a continuum of agents conduct directed random searches for counterparties. Our results provide the first probabilistic foundation for static and dynamic models of directed search (including the matching-function approach) that are common in search-based models of financial markets, monetary theory, and labor economics. The agents' types are shown to be independent discrete-time Markov processes that incorporate the effects of random mutation, random matching with match-induced type changes, and with the potential for enduring partnerships that may have randomly timed break-ups. The multi-period cross-sectional distribution of types is shown to be deterministic and is calculated using the exact law of large numbers.

Keywords: Independent dynamic random matching; Directed search; Enduring partnerships; Exact law of large numbers; Population dynamics; Random mutation (search for similar items in EconPapers)
JEL-codes: C02 D83 E00 G10 J64 (search for similar items in EconPapers)
Date: 2018
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Working Paper: Dynamic Directed Random Matching (2017) Downloads
Working Paper: Dynamic Directed Random Matching (2015) Downloads
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