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Matching Markets with Signals

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Author Info
Alexey Kushnir (Pennsylvania State University)
Abstract

A costless signaling mechanism has been proposed as a device to improve welfare in decentralized two-sided matching markets. An example of such an environment is a job market for new Ph.D. economists. We study a market game of incomplete information between firms and workers and show that costless signaling is actually harmful in some matching markets. Specifically, if agents have very similar preferences, signaling lessens the total number of matches and the welfare of firms, as well as it affects ambiguously the welfare of workers. These results run contrary to previous findings that costless signaling facilitates match formation.

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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2009.39.

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Date of creation: May 2009
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Handle: RePEc:fem:femwpa:2009.39

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Related research
Keywords: Matching Markets; Signaling;

Find related papers by JEL classification:
C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General

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  3. Alcalde, Jose, 1996. "Implementation of Stable Solutions to Marriage Problems," Journal of Economic Theory, Elsevier, vol. 69(1), pages 240-254, April. [Downloadable!] (restricted)
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  4. Bogomolnaia, Anna & Moulin, Herve, 2001. "A New Solution to the Random Assignment Problem," Journal of Economic Theory, Elsevier, vol. 100(2), pages 295-328, October. [Downloadable!] (restricted)
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  6. Alcalde, Jose & Romero-Medina, Antonio, 2000. "Simple Mechanisms to Implement the Core of College Admissions Problems," Games and Economic Behavior, Elsevier, vol. 31(2), pages 294-302, May. [Downloadable!] (restricted)
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This page was last updated on 2009-11-6.

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