Decentralized Market Processes to Stable Job Matchings with Competitive Salaries
AbstractWe analyze a decentralized trading process in a basic labor market where heterogeneous firms and workers meet directly and randomly, and negotiate salaries with each other over time. Firms and workers may not have a complete picture of the entire market and can thus behave myopically in the process. Our main result establishes that, starting from an arbitrary initial market state, there exists a finite sequence of successive myopic (firm-worker) pair improvements, or bilateral trades, leading to a stable matching between firms and workers with a scheme of competitive salary offers. An important implication of this result is that a general random process where every possible bilateral trade is chosen with a positive probability converges with probability one to a competitive equilibrium of the market.
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Bibliographic InfoPaper provided by Department of Economics, University of York in its series Discussion Papers with number 11/03.
Date of creation: Jan 2011
Date of revision:
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Decentralized market; job matching; random path; competitive salary; stability;
Other versions of this item:
- Bo Chen & Satoru Fujishige & Zaifu Yang, 2010. "Decentralized Market Processes to Stable Job Matchings with Competitive Salaries," KIER Working Papers 749, Kyoto University, Institute of Economic Research.
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
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