Monotonicity, Non-Participation, and Directed Search Equilibria

Simon Loertscher James Bland

No 1147, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: We consider the canonical directed search framework in which sellers play pure strategies and assume that buyers play strategies that are monotone in prices, can remain inactive and choose to do so whenever their payoff from participating is zero regardless of what the other buyers do. We show that directed search equilibria, which have been the focus of the literature, are the only equilibria that satisfy these assumptions. Directed search equilibria are selected here not because buyers cannot coordinate – no such assumption is made – but because they fail to play strategies that require them to increase the demand for a seller’s good as this good becomes more expensive.

Keywords: Directed search; monotone strategies; directed search equilibrium. (search for similar items in EconPapers)
JEL-codes: C72 D72 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2012
New Economics Papers: this item is included in nep-gth and nep-mic
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:mlb:wpaper:1147

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