Matching , Search , and Heterogeneity

  title={Matching , Search , and Heterogeneity},
  author={Robert Shimer and Lones Smith},
This paper explores the efficiency of decentralized search behavior and matching patterns in a model with ex ante heterogeneity and a constant returns to scale search technology. We show that a linear tax or subsidy on search intensity decentralizes the social optimum. In the absence of the tax, high productivity agents are too willing to match, yet they search too little. Low productivity agents have the opposite behavior. As a result, the equilibrium is always inefficient in the absence of… CONTINUE READING
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