Giulia Brancaccio (Cornell University): "Efficiency in Decentralized Transport Markets"
ABSTRACT: In this paper we explore efficiency and optimal policy in decentralized transportation markets, such as taxicabs, trucks and bulk shipping. We focus on the role of search frictions, which are common in these markets. We explore how search frictions distort equilibrium allocations away from efficient outcomes, and provide analytical results for the conditions required to restore efficiency. These conditions naturally translate to a set of origin-destination efficient prices that can inform optimal policy. We then use our theoretical results to explore welfare loss and policy in the dry bulk shipping sector. We find evidence of inefficiencies that reduce international trade.
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