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Sorting versus screening: search frictions and competing mechanisms

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In a market where sellers compete by posting trading mechanisms, we allow for a general search technology and show that its features crucially affect the equilibrium mechanism. Price posting prevails when meetings are rival, i.e., when a meeting by one buyer reduces another buyer's meeting probability. Under price posting buyers reveal their type by sorting ex-ante. Only if the meeting technology is sufficiently non-rival, price posting is not an equilibrium. Multiple buyer types then visit the same sellers who screen ex-post through auctions.

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en

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application/pdf

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http://eprints.lse.ac.uk/29704/1/Sorting_versus_screening_%28LSERO%29.pdf

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