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An Equilibrium Analysis of Search and Breach of Contract

Peter Diamond () and Eric Maskin

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: The literature on markets where agents have imperfect information about their trading possibilities has been growing considerably. Many models of this literature depend fundamentally on asymmetries : either buyers or sellers set prices but not both. We, however, shall consider a symmetric model where individuals meet pairwise and negotiate contracts. Individuals find potential contracting partners in a costly, stochastic search process. The purpose of a contract is to carry out a single project. The worth of a project depends on the quality of the match between the two individuals. Our model, in fact, assumes for simplicity precisely two qualities : good (project with large output) and poor (project with small output). An individual, therefore, can be in any of these three positions : without a partner, in a poor partnership, or in a good partnership.

Date: 1978
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https://warwick.ac.uk/fac/soc/economics/research/w ... 78-1988/twerp130.pdf

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Working Paper: AN EQUILIBRIUM ANALYSIS OF SEARCH AND BREACH OF CONTRACT (1978) Downloads
Working Paper: An Equilibrium Analysis of Search and Breach of Contract, I (1978)
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:130

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