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Competitive Wages in a Match with Ordered Contracts

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  • Muriel Niederle

Abstract

Following the recently dismissed antitrust lawsuit against the National Residency Matching Program (NRMP), Jeremy Bulow and Jonathan Levin (2006) propose a simple matching model in which firms set impersonal salaries simultaneously before matching with workers, which leads to lower aggregate wages than any competitive outcome. I model a feature of the NRMP, ordered contracts, that allows firms to set several contracts while determining the order in which they try to fill them, which has different properties than standard models with multiple contracts. Furthermore, the low wages of Bulow and Levin are no longer an equilibrium, but competitive wages are. (JEL D86, J31, J41)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 97 (2007)
Issue (Month): 5 (December)
Pages: 1957-1969

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Handle: RePEc:aea:aecrev:v:97:y:2007:i:5:p:1957-1969

Note: DOI: 10.1257/aer.97.5.1957
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  1. Muriel Niederle & Alvin E Roth, 2003. "Unraveling Reduces Mobility in a Labor Market: Gastroenterology with and without a Centralized Match," Levine's Working Paper Archive 506439000000000428, David K. Levine.
  2. Elliott Peranson & Alvin E. Roth, 1999. "The Redesign of the Matching Market for American Physicians: Some Engineering Aspects of Economic Design," American Economic Review, American Economic Association, American Economic Association, vol. 89(4), pages 748-780, September.
  3. Muriel Niederle & Alvin E. Roth, 2004. "Market Culture: How Norms Governing Exploding Offers Affect Market Performance," NBER Working Papers 10256, National Bureau of Economic Research, Inc.
  4. McKinney, C. Nicholas & Niederle, Muriel & Roth, Alvin, 2005. "The collapse of a medical labor clearinghouse (and why such failures are rare)," Scholarly Articles 2570404, Harvard University Department of Economics.
  5. Jeremy Bulow & Jonathan Levin, 2006. "Matching and Price Competition," American Economic Review, American Economic Association, American Economic Association, vol. 96(3), pages 652-668, June.
  6. Muriel Niederle & Alvin E. Roth, 2005. "The Gastroenterology Fellowship Market: Should There Be a Match?," American Economic Review, American Economic Association, American Economic Association, vol. 95(2), pages 372-375, May.
  7. Roth, Alvin E, 1984. "The Evolution of the Labor Market for Medical Interns and Residents: A Case Study in Game Theory," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 92(6), pages 991-1016, December.
  8. Crawford, Vincent P & Knoer, Elsie Marie, 1981. "Job Matching with Heterogeneous Firms and Workers," Econometrica, Econometric Society, Econometric Society, vol. 49(2), pages 437-50, March.
  9. Roth,Alvin E. & Sotomayor,Marilda A. Oliveira, 1992. "Two-Sided Matching," Cambridge Books, Cambridge University Press, number 9780521437882, 9.
  10. John William Hatfield & Paul R. Milgrom, 2005. "Matching with Contracts," American Economic Review, American Economic Association, American Economic Association, vol. 95(4), pages 913-935, September.
  11. Roth, Alvin E, 1984. "Stability and Polarization of Interests in Job Matching," Econometrica, Econometric Society, Econometric Society, vol. 52(1), pages 47-57, January.
  12. Kelso, Alexander S, Jr & Crawford, Vincent P, 1982. "Job Matching, Coalition Formation, and Gross Substitutes," Econometrica, Econometric Society, Econometric Society, vol. 50(6), pages 1483-1504, November.
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