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Tractable Model of Dynamic Many-to-Many Matching

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  • Marcin Pęski

Abstract

We develop a tractable, dynamic, and strategic model of many-to-many matching with payoff externalities across links. The joint dynamic surplus or certain second properties of individual utilities, like pay-off externalities, can typically be identified. We characterize a class of interior equilibria as solutions to an optimization problem with an objective function that consists of welfare minus an inefficiency loss term. In equilibrium, too few matches are formed. We compare transferable and nontransferable versions of the model; the equilibria of the two versions are equivalent up to a rescaling of parameters. We describe the asymptotic limits of disappearing frictions.

Suggested Citation

  • Marcin Pęski, 2022. "Tractable Model of Dynamic Many-to-Many Matching," American Economic Journal: Microeconomics, American Economic Association, vol. 14(2), pages 1-43, May.
    • Handle: RePEc:aea:aejmic:v:14:y:2022:i:2:p:1-43
    DOI: 10.1257/mic.20190296
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    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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