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Efficient investment, search, and sorting in matching markets

Author

Listed:
  • Atakan, Alp

    (Department of Economics, Queen Mary University of London)

  • Richter, Michael

    (Department of Economics, Baruch College, Zicklin School of Business and Department of Economics, Royal Holloway, University of London)

  • Tsur, Matan

    (Department of Economics, University of Bristol)

Abstract

We study markets where heterogeneous agents first make investment decisions and then engage in costly search to form productive matches. The trading process is random search and bargaining with explicit search costs. Despite potential hold-up and matching problems, we prove that the constrained efficient allocation is an equilibrium: the agents' private incentives to invest and to accept/reject potential partners as they search are perfectly aligned with the social benefit. Furthermore, we establish a new sorting result for two-sided markets, equilibrium existence, and conditions for uniqueness.

Suggested Citation

  • Atakan, Alp & Richter, Michael & Tsur, Matan, 0. "Efficient investment, search, and sorting in matching markets," Theoretical Economics, Econometric Society.
    • Handle: RePEc:the:publsh:6786
    as

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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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