Noisy signals in real estate and monetary search models

Sellers face much uncertainty when selling a home. If a seller's home does not sell, it is unclear whether this is due to market conditions or the quality of the real estate agent. The seller updates her belief on the quality of her agent when the property does not sell. In the first chapter, I construct a model describing this learning process and test it empirically with Multiple Listing Service data. The model treats the lack of a sale as a noisy signal of the agent's quality and assumes sellers use Bayesian updating when inferring the quality of the real estate agent. The posterior belief that an agent is a low quality type is a decreasing function of the current price and the prior price. Assuming the expected benefit associated with a change in agent increases with respect to this belief, a seller is more likely to change agents with a lower current and prior price, conditional on a sale not occurring. My empirical results provide support for these theoretical implications.;In the second chapter, I investigate the conditions under which endogenously issued objects are valued, in an economy along the lines of Kiyotaki and Wright (1993) but with a finite population. In contrast to previous work (Cavalcanti and Wallace (1999)), we assume that the economy has no exogenous technology that keeps track of the actions of money issuers. My objective is to identify which additional attributes make some agents natural candidates to become money issuers. I show that there exists an equilibrium in which endogenously issued money is valued if the money issuer is relatively patient as compared to the rest of the economy. Intuitively, patience works as a commitment device that prevents the overissue of money.;In the third chapter, I analyze the intensive and extensive margins of trade in a random matching model with divisible money, where productivity differs across agents and producers can choose whether to enter in the market in every period. The model exhibits multiple equilibria: one equilibrium in which only high productive sellers enter and one equilibrium in which both high and low productive sellers enter. The main result is that the high productive sellers will produce more in the equilibrium in which both types of sellers enter, despite the fact that the average productivity in the economy is depressed by the presence of the low productive sellers. This result is in contrast to Camera and Vesley (2006), which consider a similar environment but with indivisible money. Intuitively, as long as the benefit to the buyer of having a higher probability of consumption is greater than the average productivity decrease, buyers will choose to bring more money to the market, thereby encouraging the high productive sellers to work more.