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Monotone Matching In Perfect And Imperfect Worlds

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  • Legros, Patrick
  • Newman, Andrew

Abstract

We study frictionless matching models in large production economies with and without market imperfections and/or incentive problems. We provide necessary and sufficient distribution-free conditions for monotone matching which depend on the relationship between what we call the segregation payoff - a generalization of the individually rational payoff - and the feasible set for a pair of types. Imperfections have two distinct effects that are relevant for equilibrium matching patterns: they can overwhelm the complementarity properties of the production technology and they can introduce nontransferabilities that make equilibrium matching inefficient. We also use our framework to reveal the source of differences in the comparative static properties of some models in the literature and to explore the effects of distribution on the equilibrium matching pattern.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2396.

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Date of creation: Mar 2000
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Handle: RePEc:cpr:ceprdp:2396

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Keywords: Assortative Matching; Contracts; Imperfect Markets; Organizations;

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  1. Kremer, Michael, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 551-75, August.
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