Search at the margin

José A. Carrasco, Lones Smith

Research output: Contribution to journalArticlepeer-review

2 Scopus citations


We extend search theory to multiple indivisible units and perfectly divisible assets, solving them respectively with induction and recursion. Buyer demands and prices are random, and the seller can partially exercise orders. With divisible assets, the Bellman value function is increasing and strictly concave, and the optimal reservation price falls in the position, reflecting increasing holding costs (opportunity cost of delaying optionality for inframarginal units). The marginal value exists, and is strictly convex with a falling purchase cap density. Our model is amenable to price-quantity bargaining; e.g., greater buyer bargaining power is tantamount to greater search frictions.

Original languageEnglish
Pages (from-to)3146-3181
Number of pages36
JournalAmerican Economic Review
Issue number10
StatePublished - Oct 2017


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