Knowra Search theory Search theory Search theory studies how people and firms find suitable matches when information about opportunities is limited and searching takes time or resources.
Reservation wage : The lowest wage at which a worker will accept a job offer rather than continue searching. It expresses a job seeker's acceptance threshold in labor-market search.
Rational choice theory : A framework that models choices as attempts to select the best available option under stated preferences and constraints. Search models typically derive stopping rules from agents optimizing choices over time.
Diamond–Mortensen–Pissarides model : A framework explaining unemployment and wages through costly, random matching between workers and firms. It embeds search frictions in a model of labor-market equilibrium.
Walrasian auction : An idealized market-clearing process in which prices adjust until supply equals demand. It abstracts from the time and effort required for buyers and sellers to meet.
George Stigler : An American economist whose work analyzed information, regulation, and the economics of search. His 1961 article formalized consumer search for price information.
Search cost : The time, money, or effort required to locate and evaluate options. Search costs shape how long agents look and how selective they remain.
Information economics : The study of how information affects economic decisions, markets, and institutions. Search theory applies information economics to costly discovery of opportunities.
Matching function : A relationship describing how labor-market vacancies and job seekers generate new employment matches. It aggregates the outcomes of workers' and firms' search into match formation.
Perfect competition : A market model with many price-taking buyers and sellers, homogeneous goods, and free entry and exit. Its frictionless assumptions differ from costly, incomplete search.
Peter A. Diamond : An American economist known for research on search frictions, macroeconomics, and public finance. His work showed how search frictions can sustain price dispersion and affect unemployment.
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