WHO SEARCHES?*

We consider a directed search model with buyers and sellers and determine whether buyers look for sellers or vice versa. The buyers and sellers can choose to search or wait; what they do in equilibrium depends on the relative size of the two populations and the price formation mechanism. We study bargaining and auctions and find that when one population is much larger than the other the former searches and the latter waits. Under auction with roughly equal populations some buyers and sellers search and some wait. Our results challenge the practice of postulating who searches and who waits.     

Optimal Bank Transparency

Increasing transparency is recurrently offered as a centerpiece of bank regulation. We study a competitive banking sector whose illiquid assets are funded by short‐term debt that must be refinanced. We show that welfare is a nonmonotonic function of the level of transparency: Increasing transparency fosters efficient liquidation but has an adverse effect on rollover risk given the level of risk. Banks may compensate this adverse effect by taking more risk. These offsetting effects render an intermediate level of transparency optimal. Moreover, the existence of negative social externalities of bank failures calls for making banks more opaque rather than more transparent.