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Non-Stationary Search and Assortative Matching

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  • Nicolas Bonneton
  • Christopher Sandmann

Abstract

This paper studies assortative matching in a non-stationary search-and-matching model with non-transferable payoffs. Non-stationarity entails that the number and characteristics of agents searching evolve endogenously over time. Assortative matching can fail in non-stationary environments under conditions for which Morgan (1994) and Smith (2006) show that it occurs in the steady state. This is due to the risk of worsening match prospects inherent to non-stationary environments. The main contribution of this paper is to derive the weakest sufficient conditions on payoffs for which matching is assortative. In addition to known steady state conditions, more desirable individuals must be less risk-averse in the sense of Arrow-Pratt.

Suggested Citation

  • Nicolas Bonneton & Christopher Sandmann, 2023. "Non-Stationary Search and Assortative Matching," CRC TR 224 Discussion Paper Series crctr224_2023_465, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2023_465
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp465
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    References listed on IDEAS

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    More about this item

    Keywords

    non-stationary; assortative matching; random search; risk preferences; NTU;
    All these keywords.

    JEL classification:

    • 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
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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