Search Theory; Current Perspectives

In this article I briefly review recent developments in search theory. Particular attention is given to the framework of directed search. I first illustrate the inefficiency that arises in the equilibrium of standard (undirected) search models. Then I provide a formulation of directed search and show that the resulting equilibrium eliminates the inefficiency. Examples of directed search with price posting and auction are provided both for the market with a finite number of individuals and for a large market. After describing the application of search models in monetary theory, I conclude with a remark on the future research.