EconPapers    
Economics at your fingertips  
 

General Search Market Equilibrium

James Albrecht () and Bo Axell
Additional contact information
Bo Axell: Research Institute of Industrial Economics (IFN)

No 63, Working Paper Series from Research Institute of Industrial Economics

Abstract: In this paper we extend models of “search market equilibrium” to incorporate general equilibrium considerations. The model we treat is one with a single product market and a single labor market. Imperfectly informed individuals follow optimal strategies in searching for a suitably low price and high wage. For any distribution of price and wage offers across firms these optimal strategies generate product demand and labor supply schedules. Firms then choose prices and wages to maximize expected profits taking these schedules as given, and the resulting profits are paid out to individuals as dividends. An equilibrium distribution of prices and wages is one which results from optimal price and wage setting behavior by firms given individuals optimal search strategies. There are two possible equilibrium configurations, a degenerate equilibrium in which all firms charge the same price and wage and a price and wage dispersion equilibrium. We show that there exists a degenerate equilibrium at the monopoly-monopsony price-wage combination. We also show some of the properties of a price-wage dispersion equilibrium, conditional on existence.

Keywords: General equilibrium; Singel product and labor market; Consumers; Firms (search for similar items in EconPapers)
JEL-codes: D40 D50 (search for similar items in EconPapers)
Date: 1982-04
References: Add references at CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.ifn.se/wfiles/wp/wp063a.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:0063

Access Statistics for this paper

More papers in Working Paper Series from Research Institute of Industrial Economics Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden. Contact information at EDIRC.
Series data maintained by Elisabeth Gustafsson ().

 
Page updated 2017-10-18
Handle: RePEc:hhs:iuiwop:0063