Search Frictions and Efficiency in Decentralized Transportation Markets / Giulia Brancaccio, Myrto Kalouptsidi, Theodore Papageorgiou, Nicola Rosaia.

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Brancaccio, Giulia

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w27300.Publication details: Cambridge, Mass. National Bureau of Economic Research 2020.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: In this paper we explore efficiency and optimal policy in decentralized transportation markets that suffer from search frictions, such as taxicabs, trucks and bulk shipping. We illustrate the impact of two externalities: the well-known thin/thick market externalities and what we call pooling externalities. We characterize analytically the conditions for efficiency, show how they translate into efficient pricing rules, as well as derive the optimal taxes for the case where the planner is not able to set prices. We use our theoretical results to explore welfare loss and optimal policy in dry bulk shipping. We find that the constrained efficient allocation achieves 6% welfare gains, while the first-best allocation corresponding to the frictionless world, achieves 14% welfare gains. This suggests that policy can achieve substantial gains, even if it does not alleviate search frictions, e.g. through a centralizing platform. Finally, we demonstrate that simple policies designed to mimic the optimal taxes perform well.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w27300 (Browse shelf(Opens below))	Not For Loan

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June 2020.

In this paper we explore efficiency and optimal policy in decentralized transportation markets that suffer from search frictions, such as taxicabs, trucks and bulk shipping. We illustrate the impact of two externalities: the well-known thin/thick market externalities and what we call pooling externalities. We characterize analytically the conditions for efficiency, show how they translate into efficient pricing rules, as well as derive the optimal taxes for the case where the planner is not able to set prices. We use our theoretical results to explore welfare loss and optimal policy in dry bulk shipping. We find that the constrained efficient allocation achieves 6% welfare gains, while the first-best allocation corresponding to the frictionless world, achieves 14% welfare gains. This suggests that policy can achieve substantial gains, even if it does not alleviate search frictions, e.g. through a centralizing platform. Finally, we demonstrate that simple policies designed to mimic the optimal taxes perform well.