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Costly Concessions: An Empirical Framework for Matching with Imperfectly Transferable Utility

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  • Alfred Galichon
  • Scott Duke Kominers
  • Simon Weber

Abstract

We introduce an empirical framework for models of matching with imperfectly transferable utility and unobserved heterogeneity in tastes. Our framework allows us to characterize matching equilibrium in a flexible way that includes as special cases fully and nontransferable utility models, collective models, and settings with taxes on transfers. We allow for the introduction of a general class of additive unobserved heterogeneity on agents' preferences. We show existence and uniqueness of an equilibrium under minimal assumptions. We provide two algorithms to compute the equilibrium in our model. We then show that the associated log likelihood has a simple expression and compute its derivatives. An empirical illustration is provided in the appendix.

Suggested Citation

  • Alfred Galichon & Scott Duke Kominers & Simon Weber, 2019. "Costly Concessions: An Empirical Framework for Matching with Imperfectly Transferable Utility," Journal of Political Economy, University of Chicago Press, vol. 127(6), pages 2875-2925.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/702020
    DOI: 10.1086/702020
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    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D3 - Microeconomics - - Distribution
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J4 - Labor and Demographic Economics - - Particular Labor Markets

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