Benoit Julien

Bidding for money

We analyze monetary exchange in a model that allows for directed search and multilateral matches. We consider environments with divisible goods and indivisible money, and compare the results with those in models that use random matching and bilateral bargaining. Two different pricing mechanisms are used: ex ante price posting, and ex post bidding (auctions). Also, we consider settings both with and without lotteries. We find that the model generates very simple and intuitive equilibrium allocations that are similar to those with random matching and bargaining, but with different comparative static and welfare properties.

RESIDUAL WAGE DISPARITY AND COORDINATION UNEMPLOYMENT

How much of residual wage dispersion can be explained by an absence of coordination among firms? To answer, we construct a dynamic directed search model with identical workers where firms can create high- or low-productivity jobs and are uncoordinated in their offers to workers, calibrated to the U.S. economy. Workers can exploit ex post opportunities once approached by firms, and can conduct on-the-job search. The stationary equilibrium wage distribution is hump-shaped, skewed significantly to the right, and, with baseline parameters, generates residual dispersion statistics 75-90% of those found empirically. However, the model underestimates the average duration of unemployment. Copyright 2006 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

Auctions Beat Posted Prices in a Small Market

In a model with two buyers and sellers we consider the choice of sales mechanism from three possibilities: posted prices, and auctions with and without reserve prices. With homogenous goods, sellers expected revenues are highest when both sellers auction with reserve prices 33% higher than if posting prices and 100% higher than if auctioning without reserve prices. When sellers can choose their mechanism before choosing prices, both sellers auction with a reserve price in the dominant strategy equilibrium. With heterogenous goods, the equilibrium with posted prices is inefficient (Montgomery (1991)) but the equilibria with both types of auctions are efficient.

Contingent Prices And Money

Price posting with directed search is a widely used trading mechanism. Coles and Eeckhout showed that if sellers are allowed to post prices contingent on realized demand instead of one price, then there is real market indeterminacy. In this article, we fit this contingent price-posting protocol into a monetary economy. We show that, as long as holding money is costly, there exists a unique equilibrium rather than a continuum. In this equilibrium sellers post a low price for when the buyer is alone, a high price for when several buyers show up, and buyers randomize between sellers and money holdings.

Directed search, unemployment and public policy

We examine the effects of public policy parameters in a simple directed search model of the labour market, and contrast them with those in standard random matching models with Nash bargaining. Both finite and limit versions of the directed search model are considered, and the value of the limit model as an approximation of the finite one is assessed. As with the random matching model, job creation is the key channel through with the policy parameters effect the equilibrium of the directed search model. Both comparative static effects of the policy parameters and optimal configurations are identified.

Optimal Monetary and Fiscal Policies in a Search-Theoretic Model of Money and Unemployment

In this paper we study the optimal monetary and fiscal policies of a general equilibrium model of unemployment and money with search frictions both in labor and goods markets as in Berentsen, Menzio and Wright (2010). We abstract from revenue-raising motives to focus on the welfare-enhancing properties of optimal policies. We show that some of the inefficiencies in the Berentsen, Menzio and Wright (2010) framework can be restored with appropriate fiscal policies. In particular, when lump sum monetary transfers are possible, a production subsidy financed by money printing can increase output in the decentralized market and a vacancy subsidy financed by a dividend tax even when the Hosios’ rule does not hold.

Competitive Search with Ex-post Opportunism

Abstract: We consider a frictional market where an element of the terms of trade (price or quantity) is posted ex-ante (before the matching process) while the other is determined ex-post. By doing so, sellers can exploit their local monopoly power by adjusting prices or quantities once the local demand is realized. We find that when sellers can adjust quantities ex-post, there exists a unique symmetric equilibrium where an increase in the buyer-seller ratio leads to higher quantities and prices. When buyers instead can choose quantities ex-post, a higher buyer-seller ratio leads to higher prices but lower traded quantities. These equilibrium allocations are generically constrained inefficient in both intensive and extensive margins. When sellers post ex-ante quantities and adjust prices ex-post, a symmetric equilibrium exists where buyers obtain no surplus from trade. This equilibrium allocation is not constrained efficient either. If buyers choose prices ex-post, there is no trade in equilibrium when entry is costly.

Equilibrium using credit or money with indivisible goods

This note studies the trade of indivisible goods using credit or money in a frictional market. We show how indivisibility matters for monetary equilibrium under different assumptions about price determination. Bargaining generates a price and allocation that are independent of the nominal interest or inflation rate over some range. This is not the case with price posting and directed search. In either case, we provide conditions (the nominal rate cannot be too high) under which stationary monetary equilibrium exists, and we show it is unique or generically unique.

Technology licensing and grantbacks under hidden information

This paper explores technological transfer via licensing under hidden information. The transaction features a quality choice of technology to be transferred between a licensor and a licensee that has private information about its ability to implement and refine the technology. The model accounts for the possible damage that drastic refinements and reverse licensing can do to the licensor´s market position, and makes predictions on the structure of licensing contracts. We show under what conditions a licensing contract will include a further contractual provision such as a grantback clause. Finally, the welfare implications of grantback inclusion are assessed.

Informative Advertising in Directed Search

We consider a directed search environment where capacity constrained sellers reach uncoordinated buyers through costly advertising while buyers observed all prices probabilistically. We show that: (i) the equilibrium advertising intensity has an inverted U-shape in market tightness, (ii) the equilibrium advertising intensity is higher under an auction mechanism than under posted pricing, and (iii) the equilibrium price and measure of informed buyers may be positively correlated even in large markets.