Competitive equilibrium with search frictions: Arrow-Debreu meets Diamond-Mortensen-Pisarides

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dc.contributor.author Jerez, Belén
dc.contributor.editor Universidad Carlos III de Madrid. Departamento de Economía
dc.date.accessioned 2010-12-20T15:05:39Z
dc.date.available 2010-12-20T15:05:39Z
dc.date.issued 2010-12
dc.identifier.issn 2340-5031
dc.identifier.uri http://hdl.handle.net/10016/9844
dc.description.abstract When the trading process is characterized by search frictions, traders may be rationed so markets need not clear. We argue that rationing can be part of general equilibrium, even if it is outside its normal interpretation. We build a general equilibrium model where the uncertainty arising from rationing is incorporated in the definition of a commodity, in the spirit of the Arrow- Debreu theory. Prices of commodities then depend not only on their physical characteristics, but also on the probability that their trade is rationed. The standard definition of a competitive equilibrium is extended by replacing market clearing with a matching condition. This condition relates the traders' rationing probabilities to the measures of buyers and sellers in the market via an exogenous matching function, as in the search models of Diamond (1982a, 1982b), Mortensen (1982a, 1982b) and Pissarides (1984, 1985). When search frictions vanish (so matching is frictionless) our model is equivalent to the competitive assignment model of Gretsky, Ostroy and Zame (1992, 1999). We adopt their linear programming approach to derive the welfare and existence theorems in our environment.
dc.format.mimetype application/octet-stream
dc.format.mimetype application/octet-stream
dc.format.mimetype application/pdf
dc.language.iso eng
dc.relation.ispartofseries UC3M Working papers. Economics
dc.relation.ispartofseries 10-39
dc.rights Atribución-NoComercial-SinDerivadas 3.0 España
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject.other Search frictions
dc.subject.other Competitive (price-taking) equilibrium
dc.subject.other Matching function
dc.subject.other Linear programming
dc.subject.other Duality
dc.title Competitive equilibrium with search frictions: Arrow-Debreu meets Diamond-Mortensen-Pisarides
dc.type workingPaper
dc.subject.jel D50
dc.subject.jel D61
dc.subject.jel D80
dc.subject.eciencia Economía
dc.rights.accessRights openAccess
dc.identifier.repec we1039
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