Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/262342 
Year of Publication: 
2022
Series/Report no.: 
ECONtribute Discussion Paper No. 180
Publisher: 
University of Bonn and University of Cologne, Reinhard Selten Institute (RSI), Bonn and Cologne
Abstract: 
We study the role of traders' meeting capacities in decentralized markets with adverse selection. Uninformed customers choose trading mechanisms in order to find a provider for a service. Providers are privately informed about their quality and aim to match with one of the customers. We consider a rich set of meeting technologies and characterize the properties of the equilibrium allocations for each of them. In equilibrium, different provider types can be separated either via sorting - they self-select into different submarkets - or screening within the trading mechanism, or a combination of the two. We show that, as the meeting technology improves, the equilibrium features more screening and less sorting. Interestingly, this reduces both the average quality of trade as well as the total level of trade in the economy. The trading losses are, however, compensated by savings in entry costs, so that welfare increases.
Subjects: 
Competitive Search
Adverse Selection
Market Segmentation
JEL: 
C78
D44
D83
Document Type: 
Working Paper

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