Paths to the Frontier

We construct a model of collective search in which players gradually approach the Pareto frontier. The players have imperfect control over which improvements to the status quo will be considered. Inefficiency takes place due to the difficulty in finding improvements acceptable to both parties. The p...

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Bibliographic Details
Published in:American economic journal. Microeconomics 2022-02, Vol.14 (1), p.39-69
Main Authors: Acharya, Avidit, Ortner, Juan
Format: Article
Language:English
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Summary:We construct a model of collective search in which players gradually approach the Pareto frontier. The players have imperfect control over which improvements to the status quo will be considered. Inefficiency takes place due to the difficulty in finding improvements acceptable to both parties. The process is path dependent, with early agreements determining long-run outcomes. It may also be cyclical, as players alternate between being more and less accommodating. (JEL C73, C78, D83)
ISSN:1945-7669
1945-7685
DOI:10.1257/mic.20190125