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Decentralized Matching Markets with Endogenous Salaries

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  • Hideo Konishi

    ()
    (Boston College)

  • Margarita Sapozhnikov

    (Boston College)

Abstract

In a Shapley-Shubik assignment problem with a supermodular output matrix, we consider games in which each firm makes a take-it-or-leave-it salary offer to one applicant, and a match is made only when the offer is accepted by her. We consider both one-shot and multistage games. In either game, we show that there can be many equilibrium salary vectors which are higher or lower than the minimal competitive salary vector. If we exclude artificial equilibria, applicants' equilibrium salary vectors are bounded above by the minimal competitive salary vector, while firms' equilibrium payoff vectors are bounded below by the payoff vector under the minimal competitive salary vector. This suggests that adopting the minimal competitive salary vector as the equilibrium outcome in decentralized markets does not have a strong justification.

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Bibliographic Info

Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 654.

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Length: 36 pages
Date of creation: 10 Nov 2006
Date of revision: 03 Jan 2008
Publication status: published, Games and Economic Behavior, 2008, 64:193-218.
Handle: RePEc:boc:bocoec:654

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  1. Chatterjee, Kalyan & Bhaskar Dutta & Debraj Ray & Kunal Sengupta, 1993. "A Noncooperative Theory of Coalitional Bargaining," Review of Economic Studies, Wiley Blackwell, vol. 60(2), pages 463-77, April.
  2. Gale, D. & Sabourian, H., 2003. "Markov Equilibria in Dynamic Matching and Bargaining Games," Cambridge Working Papers in Economics 0322, Faculty of Economics, University of Cambridge.
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  4. Muriel Niederle, 2006. "Competitive Wages in a Match with Ordered Contracts," NBER Working Papers 12334, National Bureau of Economic Research, Inc.
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  7. Takashi Hayashi & Toyotaka Sakai, 2009. "Nash implementation of competitive equilibria in the job-matching market," International Journal of Game Theory, Springer, vol. 38(4), pages 453-467, November.
  8. Ray, D. & Vohra, R., 1996. "A Theory of Endogenous Coalition Structure," Papers 68, Boston University - Industry Studies Programme.
  9. 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.
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  12. Robert Shimer, 2001. "The Assignment of Workers to Jobs In an Economy with Coordination Frictions," NBER Working Papers 8501, National Bureau of Economic Research, Inc.
  13. Roth, Alvin E & Xing, Xiaolin, 1994. "Jumping the Gun: Imperfections and Institutions Related to the Timing of Market Transactions," American Economic Review, American Economic Association, vol. 84(4), pages 992-1044, September.
  14. Fuhito Kojima, 2007. "Matching and Price Competition: Comment," American Economic Review, American Economic Association, vol. 97(3), pages 1027-1031, June.
  15. 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, vol. 92(6), pages 991-1016, December.
  16. Bloch, Francis, 1996. "Sequential Formation of Coalitions in Games with Externalities and Fixed Payoff Division," Games and Economic Behavior, Elsevier, vol. 14(1), pages 90-123, May.
  17. Alvin E Roth & Muriel Niederle, 2007. "Making Markets Thick: Designing Rules for Offers and Acceptances," Levine's Bibliography 843644000000000142, UCLA Department of Economics.
  18. Okada, Akira, 1996. "A Noncooperative Coalitional Bargaining Game with Random Proposers," Games and Economic Behavior, Elsevier, vol. 16(1), pages 97-108, September.
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Cited by:
  1. Kohei, Kawamura & József, Sákovics, 2013. "Spillovers of Equal Treatment in Wage Offers," SIRE Discussion Papers 2013-15, Scottish Institute for Research in Economics (SIRE).
  2. Fuhito Kojima, 2007. "Matching and Price Competition: Comment," American Economic Review, American Economic Association, vol. 97(3), pages 1027-1031, June.
  3. Kohei Kawamura (University of Edinburgh) and Jozsef Sakovics(University of Edinburgh), 2013. "Partial Equal Treatment in Wage Offers," ESE Discussion Papers 215, Edinburgh School of Economics, University of Edinburgh.
  4. Muriel Niederle & Leeat Yariv, 2009. "Decentralized Matching with Aligned Preferences," NBER Working Papers 14840, National Bureau of Economic Research, Inc.
  5. József Sákovics, 2011. "A labor market with targeted wage offers," ESE Discussion Papers 207, Edinburgh School of Economics, University of Edinburgh.

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