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Efficiency, sorting, and selection

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  • Peralta, Esteban

Abstract

In labor markets in which workers’ types are private information, Liu, Mailath, Postlewaite, and Samuelson (2014) show that stable matchings are positive assortative and efficient within monotonic and supermodular domains. I show that efficiency and sorting are obtained because within their domains most failures of positive assortativeness and efficiency lead workers to select themselves favorably with respect to the firms, but prove a more general result, because monotonicity can be weakened, that holds true regardless of how firms’ values depend on workers’ types. The generalization hinges more heavily on firms’ higher-order inferences and requires firms’ values to be nonmonotonic in workers’ types.

Suggested Citation

  • Peralta, Esteban, 2025. "Efficiency, sorting, and selection," Journal of Mathematical Economics, Elsevier, vol. 121(C).
    • Handle: RePEc:eee:mateco:v:121:y:2025:i:c:s0304406825001041
    DOI: 10.1016/j.jmateco.2025.103187
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    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D6 - Microeconomics - - Welfare Economics
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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