Max wrote--
I vaguely remember the quality-price thing. Was there much follow-up to
that paper?
Yes and no. It was primarily a survey of the literature on the phenomenon,
most of the threads of which kept going. There are some critiques of the
general idea of asymmetric information as a basis for non-market-clearing
equilibrium, esp. in the context of labor markets, and responses to those
critiques. The price/quality idea informed the early 90s mainstream debate
on dual labor markets and interindustry wage differentials, with Dickens
and Lang, Summers and Katz and others carrying the ball, pretty effectively
I thought, for the existence of market segmentation.
And, by the way, contra Max, persistent ("equilibrium") shortages are most
definitely not "impossible" in micro. They can arise due to monopsony
power or a phenomenon Stiglitz refers to as "the dependence of quality on
price." It is typical to have supra-market-clearing equilibrium wages in
the latter scenario.
Gil
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