Regulations in Search Markets

In a market with information costs, i.e., a search market, the equilibrium formation of prices and outputs will differ significantly from that of a purely competitive market. The equilibrium will be either a monopoly price or a price distribution. Hence, it is normally not a socially optimal situation. The problem discussed in this paper is what kinds of rules and regulations that can be introduced in a search market to improve the solution from a social welfare point of view.