RESEARCH
Working papers
“Middlemen in Search Models with Intensive and Extensive Margins”, Job Market Paper
This paper studies the emergence of middlemen (intermediation) and its consequences for welfare and redistribution. In Rubinstein and Wolinsky’s seminal model on intermediation, middlemen only create value when they have an exogenous advantage in their search speed. I show that this result depends critically on the restriction that middlemen can only carry indivisible quantities of goods. Taking into account the intensive margin of production and allowing them to carry divisible quantities, middlemen with comparatively high bargaining power can create value even when they have a disadvantage in their search cost. While the presence of middlemen can improve welfare, equilibria remain suboptimal due to search and participation externalities. I describe a multi-instrument tax-subsidy scheme that controls participation levels by producers and middlemen and restores efficiency.
“Inflation, Investment and Unemployment: A New Monetarist Framework”, with Benoit Julien and Yu Zhu
This paper studies long-run effect of inflation on employment and investment in a new monetarist model with a frictional labor market, and a frictional goods market with different market structures. Higher inflation leads to higher unemployment, less capital accumulation and fewer firm entry. These effects are robust to goods market structures. We also show that unemployment benefits lead to more unemployment, less firm entry and less capital. However, depending on the market structure, active firms may become larger or smaller. The model is tractable and delivers many analytic results.
“Rubinstein and Wolinsky Meet Directed Search”, with Randall Wright
In this paper we study when intermediation – i.e., middlemen – can be an equilibrium or an efficient outcome in a frictional market with price posting and directed search. First formalized by Rubinstein and Wolinsky (RW), with random search and bargaining, intermediation is an equilibrium and is efficient if and only if intermediaries have an advantage over producers in their ability to search for consumers. Extensions allow intermediaries to have other advantages, including superior information, storage capacity, storage cost, or bargaining power. We take a different approach, replacing bargaining and random search with price posting and directed search. This avoids the “black box” of exogenous bargaining powers or matching frequencies. We study how intermediation can emerge endogenously and it can be essential (improve the allocation over what obtains if it were ruled out). We also study how outcomes change when the general search technology and the storage cost change.
This paper studies the emergence of middlemen (intermediation) and its consequences for welfare and redistribution. In Rubinstein and Wolinsky’s seminal model on intermediation, middlemen only create value when they have an exogenous advantage in their search speed. I show that this result depends critically on the restriction that middlemen can only carry indivisible quantities of goods. Taking into account the intensive margin of production and allowing them to carry divisible quantities, middlemen with comparatively high bargaining power can create value even when they have a disadvantage in their search cost. While the presence of middlemen can improve welfare, equilibria remain suboptimal due to search and participation externalities. I describe a multi-instrument tax-subsidy scheme that controls participation levels by producers and middlemen and restores efficiency.
“Inflation, Investment and Unemployment: A New Monetarist Framework”, with Benoit Julien and Yu Zhu
This paper studies long-run effect of inflation on employment and investment in a new monetarist model with a frictional labor market, and a frictional goods market with different market structures. Higher inflation leads to higher unemployment, less capital accumulation and fewer firm entry. These effects are robust to goods market structures. We also show that unemployment benefits lead to more unemployment, less firm entry and less capital. However, depending on the market structure, active firms may become larger or smaller. The model is tractable and delivers many analytic results.
“Rubinstein and Wolinsky Meet Directed Search”, with Randall Wright
In this paper we study when intermediation – i.e., middlemen – can be an equilibrium or an efficient outcome in a frictional market with price posting and directed search. First formalized by Rubinstein and Wolinsky (RW), with random search and bargaining, intermediation is an equilibrium and is efficient if and only if intermediaries have an advantage over producers in their ability to search for consumers. Extensions allow intermediaries to have other advantages, including superior information, storage capacity, storage cost, or bargaining power. We take a different approach, replacing bargaining and random search with price posting and directed search. This avoids the “black box” of exogenous bargaining powers or matching frequencies. We study how intermediation can emerge endogenously and it can be essential (improve the allocation over what obtains if it were ruled out). We also study how outcomes change when the general search technology and the storage cost change.