Submitted:
Non-stationary Search and Assortative Matching - joint with Nicolas Bonneton (accepted at Econometrica)
This paper studies assortative matching in a non-stationary search-and-matching model with non-transferable payoffs. Non-stationarity entails that the number and characteristics of agents searching evolve endogenously over time. Assortative matching can fail in non-stationary environments under conditions for which Morgan (1994) and Smith (2006) show that it occurs in the steady state. This is due to the risk of worsening match prospects inherent to non-stationary environments. The main contribution of this paper is to derive the weakest sufficient conditions on payoffs for which matching is assortative. In addition to known steady state conditions, more desirable individuals must be less risk-averse in the sense of Arrow-Pratt.
Existence of a Non-Stationary Equilibrium in Search-and-Matching Models: TU and NTU - joint with Nicolas Bonneton (accepted at Theoretical Economics)
This paper proves the existence of a non-stationary equilibrium in the canonical search-and-matching model with heterogeneous agents. Non-stationarity entails that the number and characteristics of unmatched agents evolve endogenously over time. An equilibrium exists under minimal regularity conditions and for both paradigms considered in the literature: transferable and non-transferable utility. To address potential discontinuities in match opportunities across types, our analysis introduces a generalized Schauder fixed-point theorem suitable for models with discontinuous value functions.
When are Sparse Menus Profit-Maximizing?
This paper examines when price discrimination results in a sparse menu—a product line with gaps. Under private values, Johnson and Myatt (2006) show that gaps arise when marginal surplus is log submodular. We extend the analysis to common value environments, where the seller’s cost depends on the buyer’s type (e.g., insurance, corporate finance, insider trading). When adverse selection prevails, lower types may be more profitable despite greater price-elasticity of demand. In such cases, targeting via an expanded product line raises profit. To determine when gaps arise, we analyze the quasi-concavity and -convexity of virtual surplus. Monotonicity of the cross-partial of utility relative to marginal surplus emerges as the key condition. Where this ratio is decreasing, discontinuous bunching is optimal. The hybrid maximum principle characterizes the discontinuities. Applications show that adverse selection weakens, while advantageous selection strengthens, the case for sparse menus.
Market Structure and Adverse Selection - joint with Dakang Huang (Dakang's JMP)
This paper presents a unified perspective on multi-contracting in markets afflicted by adverse selection. We subsume the polar cases of exclusive and nonexclusive competition by introducing the concept of a market structure: a trading rule that specifies the subset of sellers with whom buyers can jointly trade. Normative results single out the “1+1” market structure, where buyers trade with one seller from each of two subgroups. If adverse selection is severe, adopting the “1+1” market structure Pareto-improves upon the exclusive equilibrium allocation. When, in addition, purchases must include a contract exceeding a minimum quantity, the equilibrium allocation is second-best efficient.
In progress:
Probabilistic Assortative Matching under Nash Bargaining - joint with Nicolas Bonneton (Nicolas' JMP)