Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2024-02-29
Number: 24-015/VIII
Author-Name: Xiaoming Cai
Author-Workplace-Name: Peking University HSBC Business School
Author-Name: Pieter Gautier
Author-Workplace-Name: VU University Amsterdam
Author-Name: Ronald Wolthoff
Author-Workplace-Name: University of Toronto
Title: Spatial Search
Abstract: This paper considers a random search model where some locations provide sellers with better chances of meeting many buyers than other locations (for example popular shopping streets or the first page of a search engine). When sellers are heterogeneous in terms of the quality of their product and/or the probability that a given buyer likes their product, it is desirable that sellers of high-quality niche products sort into the best locations. We show that this does not always happen in a decentralized market. Finally, we allow for endogenous location distributions and show that more trades are realized when locations are similar (in which case the aggregate matching function is urn-ball) but that quality weighted trade can be higher when locations are heterogeneous.
Classification-JEL: C78, D44, D83
Keywords: search frictions, spatial equilibrium, sorting
File-URL: https://papers.tinbergen.nl/24015.pdf
File-Format: application/pdf
File-Size: 523.681 bytes
Handle: RePEc:tin:wpaper:20240015