The Effect of Search Frictions on Extreme Outcomes (With Louis Becker)

Speaker: Associate Professor Sephorah Mangin
Affiliation: Australian National University
Location: Room 128, Therapies Building (#84), UQ St Lucia Campus

Abstract 

Extreme value processes involving maxima are widespread in economics. We provide some general results regarding the asymptotic effect of search frictions on the outcomes of such processes. To do this, we allow the number of draws from the underlying distribution (e.g. of productivities, efficiencies, or ideas) to be given by a discrete probability distribution called the search technology. We show that extreme value outcomes depend not only on the underlying distribution and its tail index, but also on the search technology. For example, if the underlying distribution is Pareto, the extreme value distribution is Fréchet if and only if the search technology is either Poisson or degenerate. We consider some applications of our results to both aggregate productivity, markups, and large auctions.

About the presenters visit 

If you would like to meet with A/Prof Mangin, please contact: Dr Satoshi Tanaka.