Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/249873 
Year of Publication: 
2022
Series/Report no.: 
ECONtribute Discussion Paper No. 135
Publisher: 
University of Bonn and University of Cologne, Reinhard Selten Institute (RSI), Bonn and Cologne
Abstract: 
We study the effect of diminishing search frictions in markets with adverse selection by presenting a model in which agents with private information can simultaneously contact multiple trading partners. We highlight a new trade-off: facilitating contacts reduces coordination frictions but also the ability to screen agents' types. We find that, when agents can contact sufficiently many trading partners, fully separating equilibria obtain only if adverse selection is sufficiently severe. When this condition fails, equilibria feature partial pooling and multiple equilibria co-exist. In the limit, as the number of contacts becomes large, some of the equilibria converge to the competitive outcomes of Akerlof (1970), including Pareto dominated ones; other pooling equilibria continue to feature frictional trade in the limit, where entry is inefficiently high. Our findings provide a basis to assess the effects of recent technological innovations which have made meetings easier.
Subjects: 
Directed Search
Adverse Selection
JEL: 
D82
D83
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.