Navid Safahieh
Ph.D. Candidate in Economics, Purdue University
nsafahie [at] purdue.edu
I study how agents on different sides of a market search for and match with each other, especially when there is heterogeneity on both sides. My job market paper is an example of this. I study how agents search and get matched in transportation markets, where agents are differentiated by their locations, and where location affects their ability to compete for different markets. I develop a search and matching model in which carriers and travelers are differentiated by location, and study how these differences shape competition, market access, and the matches that form.
Match Now, Arrive Later: Transport Markets with Remote Search
In transport markets, carriers are often hired while still far from the cargo, and the customer waits while the carrier travels toward the cargo. I develop a dynamic spatial directed search model that allows for this remote matching. In existing models of transport markets, matching is local: a carrier must sail to a cargo before it can compete for it, sinking the cost of the trip for a cargo it may not win. With remote matching, a carrier competes from where it is for cargoes at every location, and a customer can attract carriers from every location, at the cost of waiting while they travel, so competition for carriers and for cargoes extends across locations. In a two-location example in which cargo moves in one direction only, as trips become more valuable, carriers stop sailing to the cargo before they are hired and wait to be hired remotely, even though being near the cargo remains more valuable: the cost of the time a carrier spends sailing without a contract, instead of applying, grows faster with the value of a trip than the premium of being near the cargo. Customers then hire more distant carriers and wait longer, consistent with tankers being fixed farther from the loading port when freight markets are strong. Compared with an otherwise identical model with local matching only, once trips are valuable enough, carriers are worth more at every location and the premium of being near the cargo is smaller. In an application with the Persian Gulf, Europe and Asia, I close Bab el-Mandeb, which lengthens voyages from the Gulf to Europe. The outcome depends on the value of a trip to Europe. When it is high enough that the detour is worth taking, the shock negatively affects the route to Asia, which does not use the passage: its fee rises and less cargo moves on it. When it is lower, carriers shift to the Asia route and its fee falls. Over a wide range of values, remote matching amplifies the spillover: customers shipping to Europe keep shipping by hiring distant carriers, and shipments to Asia fall more than with local matching.
- Draft coming soon