Two-sided search and perfect segregation with fixed search costs (Q5939661)

Consider a population that can be divided from the outset into two disjoint categories (e.g. males and females, firms and workers). Each agent from one group wants to pair off with one agent from the other group, but potential mates are not all equivalent as they differ in their characteristics. Agents from both populations who are trying for a match meet at random, and at a cost, members of the opposite group. They then decided whether to match forever or continue their costly search for a possible better match. This paper shows that both male and female populations will become partitioned into subpopulations which will mate only with their corresponding counterpart, i.e. there will be segregation in matching. The duration of search depends on the size of the class to which the agent belongs. Search duration may or may not increase with the type of the agent. Conditions on modeling search frictions are provided that guarantee the segregation property.