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Matching rules

  • Vincy Fon

    (Department of Economics, George Washington University, USA)

  • Francesco Parisi

    (School of Law, University of Minnesota, MN, USA; Department of Economics, University of Bologna, Italy)

Institutions often utilize matching rules to achieve cooperative outcomes. However, the equilibrium induced by a matching rule may not be socially optimal. After presenting the case in which matching rules yield privately and socially optimal levels of cooperation, this article identifies the conditions which generate inefficient cooperation. Matching rules undershoot (i.e. parties cooperate less than is socially optimal) in one group of cases. In a second, more puzzling case, matching rules overshoot (i.e. parties that interact under a matching constraint are induced to cooperate more than is socially optimal). This paper identifies the conditions for such occurrences. Copyright © 2008 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/mde.1400
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Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 29 (2008)
Issue (Month): 1 ()
Pages: 57-70

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Handle: RePEc:wly:mgtdec:v:29:y:2008:i:1:p:57-70
Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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  1. Nicholas Economides & Giuseppe Lopomo & Glenn Woroch, 2005. "Strategic Commitments and the Principle of Reciprocity in Interconnection Pricing," Working Papers 05-10, New York University, Leonard N. Stern School of Business, Department of Economics.
  2. Hoffman, Elizabeth & McCabe, Kevin A & Smith, Vernon L, 1998. "Behavioral Foundations of Reciprocity: Experimental Economics and Evolutionary Psychology," Economic Inquiry, Western Economic Association International, vol. 36(3), pages 335-52, July.
  3. G. Daniel & M. Arce & Todd Sandler, 2005. "The Dilemma of the Prisoners' Dilemmas," Kyklos, Wiley Blackwell, vol. 58(1), pages 3-24, 02.
  4. Arce M, Daniel G, 2001. "Leadership and the Aggregation of International Collective Action," Oxford Economic Papers, Oxford University Press, vol. 53(1), pages 114-37, January.
  5. Marco Becht, 2004. "Reciprocity in takeovers," ULB Institutional Repository 2013/13326, ULB -- Universite Libre de Bruxelles.
  6. Sugden, Robert, 1984. "Reciprocity: The Supply of Public Goods through Voluntary Contributions," Economic Journal, Royal Economic Society, vol. 94(376), pages 772-87, December.
  7. Francesco Parisi, 2000. "The Cost of the Game: A Taxonomy of Social Interactions," European Journal of Law and Economics, Springer, vol. 9(2), pages 99-114, March.
  8. Todd Sandler, 1998. "Global and regional public goods: a prognosis for collective action," Fiscal Studies, Institute for Fiscal Studies, vol. 19(3), pages 221-247, August.
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