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Partnership Dissolution in a Search Market With On-The-Match Learning

Author

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  • Finn Schmieter

Abstract

We construct a frictional search-and-matching model with on-the-match learning and rematching. Agents are ex-ante homogeneous, have idiosyncratic preferences, and receive news about the profitability of their current match following a Poisson process. We provide an infinite number of pointwise balance conditions and a finite number of aggregate balance conditions and prove their equivalence. We show that agents follow cutoff strategies in the unique steady-state equilibrium. If the profitability types inside a match have a strong positive (negative) correlation, then a faster learning rate is ex-ante welfare-increasing (decreasing) for the agents.

Suggested Citation

  • Finn Schmieter, 2022. "Partnership Dissolution in a Search Market With On-The-Match Learning," CRC TR 224 Discussion Paper Series crctr224_2022_327, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2022_327
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp327
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    More about this item

    Keywords

    Search frictions; matching; on-the-job search; learning;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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