Eeckhout, JanKircher, Philipp Albert Theodor2016-02-222016-02-222010Eeckhout J, Kircher P. Sorting and decentralized price competition. Econometrica. 2010;78(2):539-740012-9682http://hdl.handle.net/10230/25921We investigate the role of search frictions in markets with price competition and how it leads to sorting of heterogeneous agents. There are two aspects of value creation: the match value when two agents actually trade and the probability of trading governed by the search technology. We show that positive assortative matching obtains when complementarities in the former outweigh complementarities in the latter. This happens if and only if the match-value function is root-supermodular, that is, its nth root is supermodular, where n reflects the elasticity of substitution of the search technology. This condition is weaker than the condition required for positive assortative matching in markets with random search.application/pdfeng© The Econometric Society 2014. The copyright to this article is held by the Econometric Society, http://www.econometricsociety.org/. It may be downloaded, printed and reproduced only for personal or classroom use. Absolutely no downloading or copying may be done for, or on behalf of, any for-profit commercial firm or for other commercial purpose without the explicit permission of the Econometric Society. For this purpose, contact the Editorial Office of the Econometric Society at econometrica@econometricsociety.org.PreusCompetència econòmica -- Models matemàticsinfo:eu-repo/semantics/articlehttp://dx.doi.org/10.3982/ECTA7953competitive search equilibriumdirected searchsortingtwo-sided matchingdecentralized price competitioncomplementarityroot-supermodularityinfo:eu-repo/semantics/openAccess