An alternative approach to search frictions

This paper illustrates an alternative approach to modeling search frictions . Frictions are not assumed to exist, but are shown to arise endogenously a s a distinctive feature of the set of equilibria that correspond to a parti cular range of parameter values. The model's spatial structure and the agen ts' moving decisions are explicitly spelled out, allowing the number of con tacts that occur to depend on the way agents choose to locate themselves. A n aggregate matching function is shown to exist, and its behavior with resp ect to changes in parameters such as distances between locations, the agent s' payoffs, and the sizes of the populations of searchers on each side of t he market is completely characterized.