How To Eliminate Friction Between Buyers And Sellers The “Search Theory”

This year’s Nobel Prize in economics was awarded to three men for their “Search Theory’.

From the Wall Street Journal:

The trio pioneered research into the difficulties buyers and sellers often face in finding each other in the marketplace—and in particular, how that applies in the job market, where the buyers and sellers are employers and workers. This “search theory” has since been applied to a host of other topics, from the housing market to the search for a spouse.

The research by the three economists concluded high unemployment can be the result of “friction,” which keeps employers and workers apart. That friction can be tough regulatory rules on firing, or the lack of appropriate skills among the unemployed, among other things.

The research has also focused on unemployment insurance, with one conclusion being that more generous benefits give rise to higher unemployment—because workers spend more time looking. This ultimately is a benefit to the economy, however, because it leads to workers landing jobs that better use their capabilities.

Coincidentally, I too discovered degrees of “friction” prevent buyers and sellers from finding each other let alone successfully completing transactions.

My upcoming book For Sale by Google describes specifically how to identify what friction separates buyers and sellers and then how to eliminate it.


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