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Self-Enforced Job Matching

Author

Listed:
  • Ce Liu
  • Ziwei Wang
  • Hanzhe Zhang

Abstract

Complementarities and peer effects are common in matching markets, yet incorporating them often leads to nonexistence of stable matchings. We observe that matching is often an ongoing process rather than a static allocation, where long-lived firms interact over time with short-lived workers. We show that when wages are flexible and firms are sufficiently patient, a dynamically stable solution always exists in many-to-one matching markets—even with complementarities and peer effects. Flexible wages are crucial to our result, as they not only facilitate surplus extraction when firms cooperate in no-poaching agreements but also enhance the threat of punishment through bidding wars.

Suggested Citation

  • Ce Liu & Ziwei Wang & Hanzhe Zhang, 2026. "Self-Enforced Job Matching," American Economic Journal: Microeconomics, American Economic Association, vol. 18(2), pages 110-145, May.
    • Handle: RePEc:aea:aejmic:v:18:y:2026:i:2:p:110-45
    DOI: 10.1257/mic.20240280
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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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