This paper studies the endogenous determination of the price formation procedure in markets characterized by match-specific heterogeneity; such heterogeneity captures, for example, markets in which sellers own differentiated commodities and buyers have heterogeneous preferences. Specifically, we...

This article shows how allowing for goods to be divisible at the point of consumption and incorporating productive heterogeneity lead to the emergence of middlemen in an equilibrium search environment. In the baseline model, middlemen are welfare reducing and their number increases as market...

This paper explores the implications for labor market outcomes of systematic testing of applicants in the hiring process. A matching model in which productivity is a worker's private information is used. Both wages and hiring rates are endogenous. A minority is defined as a group for whom the...

A credit-card acceptance decision by retailers is embedded into a simple model of precautionary demand for money. The model gives a new explanation for how the use of credit-cards can differ so widely across countries. Retailers' propensity to accept cards reduces the need for buyers to hold...

This paper examines the role of commitment and advertising in the labor market for the determination of the levels of wages, human capital and physical capital. In a competitive search framework it is shown that when the characteristics of jobs or workers become common knowledge (so that the...

In a random search environment with two racial groups each composed of identical numbers of high and low productivity workers, firms use an imperfect screening device (interviews) to control hiring. If inconclusive interviews lead firms to hire majority workers but not minority workers, then the...

Wage dispersion is generated in a sequential search environment through heterogeneity in firm productivity along with an individual wage-effort trade-off. For a given degree of TFP dispersion, the framework can generate any amount of wage dispersion. Calibrated to generate realistic gains from...