Search and the market for ideas |
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Authors: | Rafael Silveira |
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Affiliation: | a Bank of America, Corporate Investments Group, United States b Department of Economics, University of Wisconsin-Madison, United States c Department of Finance, Investment and Banking, University of Wisconsin-Madison, United States d Research Department, Federal Reserve Bank of Minneapolis, United States |
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Abstract: | We study a market where innovators, who are good at coming up with ideas, can sell them to entrepreneurs, who might be better at implementing them. The market is decentralized, with random matching and bargaining. Ideas are characterized by five salient features: they are indivisible; partially nonrival; intermediate inputs; subject to informational frictions; and difficult to collateralize. This last feature gives rise to a demand by entrepreneurs for liquidity. We determine which ideas get traded in equilibrium and compare this to the efficient outcome, emphasizing the impact of bargaining and liquidity considerations. Among other applications, we study how outcomes in the idea market affect the labor market. |
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Keywords: | D83 |
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