In the two-sided search model, an increase in productivity
A) shifts $v ( Q )$ up, increasing $Q$ and decreasing $j$.
B) shifts $v ( Q )$ down, increasing $Q$ and $j$.
C) shifts $v ( Q )$ down, decreasing $Q$ and increasing $j$.
D) shifts $v ( Q )$ up, increasing $Q$ and $j$.
E) shifts $v ( Q )$ up, decreasing $Q$ and $j$.

Question

Quizplus · Accepted Answer

An increase in productivity will lead to an increase in the value of the match, $v(Q)$, which will shift upward. This will result in an increase in the number of matched pairs as both potential partners will now have a higher payoff from the match, leading to an increase in both $Q$ and $j$. Therefore, choice D is the correct answer.

In the Two-Sided Search Model, an Increase in Productivity A) v(Q)v ( Q )v(Q)

In the Two-Sided Search Model, an Increase in Productivity
A) $v ( Q )$