MIRACLE ON 6TH AVENUE - INFORMATION EXTERNALITIES AND SEARCH

After a long dormant period, Lower Sixth Avenue in New York has underg one a rapid revitalisation. We show that a simple search theoretic mod el with information spillovers can explain both the period of underuse and the rapid turnaround. The model reduces to a simple equation, whi ch allows us to do comparative statics on the duration of vacancies. W e show how the solution reacts to changes in market structure and chan ges in search technology. The model is suggestive of difficulties that may occur in many markets in which there are changes over time in the optimal use of resources.