Working Papers

PHILIPP KIRCHER

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Publications Short Description

Strategic Firms and Endogenous Consumer Emulation

with Andrew Postlewaite,

Quarterly Journal of Economics, 2008, Vol. 123(2), pp. 621-661.

Better informed consumers may be treated preferentially by firms since their consumption serves as a quality signal for other customers. For normal goods this results in wealthier individuals being treated. We investigate this phenomenon in an equilibrium model of social learning with heterogeneous consumers and firms that act strategically. (Tech Appendix)

A Model of Money with Multilateral Matching

with Manolis Galenianos,

Journal of Monetary Economics, 2008, Vol. 55, pp. 1054-1066.

We introduce sales mechanisms that reveal private information into a monetary economy, derive the distributions of money holdings and prices and show that inflation leads to scarcity from which the poor suffer most. Therefore, inflation acts as a regressive tax.

Directed Search with Multiple Job Applications with Manolis Galenianos,

Journal of Economic Theory, 2009, 114(2), pp. 445-471.

We derive the theoretical properties of an equilibrium search model in which firms strategically set wages to attract workers and workers apply to multiple firms to secure employment.

Efficiency of Simultaneous Search Journal of Political Economy, 2009, Vol. 117(5), pp. 861- 913.

Simultaneous search by workers in a frictional labor market converges to the efficient Walrasian outcome when workers search costs are small. It remains constrained efficient even if costs are not small since firms strategically set wages to attract workers and can communicate with all their applicants. Despite homogeneity, wage dispersion is essential.

Market Power and Efficiency in a Search Model with Manolis Galenianos and Gabor Virag, accepted at International Economic Review.

In a frictional labor market where a finite number of firms strategically set wages to compete for workers, minimum wages improve employment but reduce output and efficiency, while moderate unemployment benefits have the reverse effect. (Technical Appendix)

Sorting vs Screening - Prices as Optimal Competitive Sales Mechanisms with Jan Eeckhout, accepted subject to changes for the special issue on Search Theory at the Journal of Economic Theory.

In a setting where sellers compete for buyers by setting prices or more complicated sales mechanisms, they can sort buyers ex-ante by attracting different types or screen them ex-post through auction-like mechanisms. We investigate the role of the matching function for the competing mechanism design problem; in particular when simple price setting is optimal.

Sorting and Decentralized Price Competition with Jan Eeckhout, accepted at Econometrica.

We analyze the impact of search frictions in the standard competitive assignment problem of Becker’s (1973). Assortative matching depends on a simple trade-off between the supermodularity of the match-value and the elasticity of the search technology. For a large class of matching frictions the relevant condition is root-supermodularity. (older WP version)

Working Papers Short Description

Identifying Sorting – In Theory March 2009 (first draft 07/08)

with Jan Eeckhout, , under revision for Review of Economic Studies

In a simple search model, we show that wage data alone does not allow for identification of positive or negative assortative matching. Nevertheless, the strength of sorting can be identified. Since the latter fully determines the output loss from mismatch, it seems a fruitful direction for further research.

Game-theoretic Foundations of Competitive Search Equilibrium

with Manolis Galenianos, Mar. 2009

In large class of directed search games where a finite number of firms strategically competes to attract workers, we prove that a pure strategy Nash equilibrium exists. We provide novel characterization and uniqueness results, and show that the limit outcome as market size grows indeed micro-founds the standard specification for large directed search economies.