Performance and Turnover in a Stochastic Partnership
AbstractThis paper characterizes the social-welfare maximizing equilibrium of a stochastic partnership matching market", in which players paired to play a stochastic game may quit to be costlessly and anonymously re-matched. Patterns of performance and turnover in this equilibrium are consistent with the well-known \survivorship bias" and, if partners form \meaningful rst impressions", with the \honeymoon e ect". By contrast, maximizing social welfare in standard repeated games with re-matching typically requires that players receive low payo s at the start of each relationship. Welfare and turnover comparative statics are also provided: higher partnership-states are associated with higher joint payo s and, in the special case of an exogenous stochastic process, with both higher joint stage-game and joint continuation payo s as well as longer-lasting relationships.
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Bibliographic InfoPaper provided by Duke University, Department of Economics in its series Working Papers with number 10-61.
Date of creation: 2010
Date of revision:
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Web page: http://econ.duke.edu/
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