The screening role of market tightness in a competitive search with adverse selection

• 成果类型: Article
• 署名作者: Chang, Hung-Chi; Li, Yiting
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park; National Taiwan University; Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park; National Taiwan University
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2025.105995
• 发表日期: 2025
• 关键词: search; private information; adverse selection; Market tightness; liquidity

摘要

This paper revisits Guerrieri, Shimer, and Wright (2010) (GSW) to study screening in a competitive search market with adverse selection. GSW show that there exists a unique separating equilibrium in which each type applies to a different contract, and their key sorting assumption involves a single-crossing property on agents' preferences. We show that GSW's main results hold under a weaker assumption on preference heterogeneity, called generalized sorting, and weakening the sorting assumption relies on explicitly considering the screening role of market tightness. The assumption can be weakened further if we assume that agents' matching probability strictly increases in market tightness. In addition to providing theoretical insights, we study examples to demonstrate how generalized sorting facilitates the study of market imperfections under search and informational frictions. In our examples, indivisibility, price limits, and the minimum wage violate GSW's sorting assumption but remain tractable under generalized sorting. Thus, an additional contribution of this paper is the expansion in applicability of GSW's approach.