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Monotone Matching In Perfect And Imperfect Worlds

  • Legros, Patrick
  • Newman, Andrew

We study frictionless matching models in large production economies with and without market imperfections and/or incentive problems. We provide necessary and sufficient distribution-free conditions for monotone matching which depend on the relationship between what we call the segregation payoff - a generalization of the individually rational payoff - and the feasible set for a pair of types. Imperfections have two distinct effects that are relevant for equilibrium matching patterns: they can overwhelm the complementarity properties of the production technology and they can introduce nontransferabilities that make equilibrium matching inefficient. We also use our framework to reveal the source of differences in the comparative static properties of some models in the literature and to explore the effects of distribution on the equilibrium matching pattern.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2396.

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Date of creation: Mar 2000
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Handle: RePEc:cpr:ceprdp:2396
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  1. Kaneko, Mamoru & Wooders, Myrna Holtz, 1986. "The core of a game with a continuum of players and finite coalitions: The model and some results," Mathematical Social Sciences, Elsevier, vol. 12(2), pages 105-137, October.
  2. Patrick Legros & Andrew Newman, 1996. "Wealth effects, distribution, and the theory of organization," ULB Institutional Repository 2013/7036, ULB -- Universite Libre de Bruxelles.
  3. Robert Shimer & Lones Smith, 2000. "Assortative Matching and Search," Econometrica, Econometric Society, vol. 68(2), pages 343-370, March.
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  8. Roth, Alvin E. & Sotomayor, Marilda, 1992. "Two-sided matching," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 16, pages 485-541 Elsevier.
  9. Casella, Alessandra & Rauch, James E., 2002. "Anonymous market and group ties in international trade," Journal of International Economics, Elsevier, vol. 58(1), pages 19-47, October.
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  11. Roland Benabou, 1991. "Workings of a City: Location, Education, and Production," NBER Technical Working Papers 0113, National Bureau of Economic Research, Inc.
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  13. Milgrom, Paul & Shannon, Chris, 1994. "Monotone Comparative Statics," Econometrica, Econometric Society, vol. 62(1), pages 157-80, January.
  14. Myrna Holtz Wooders, 1992. "Large Games and Economies With Effective Small Groups," Discussion Paper Serie B 215, University of Bonn, Germany, revised Aug 1992.
  15. Benabou, Roland, 1996. "Equity and Efficiency in Human Capital Investment: The Local Connection," Review of Economic Studies, Wiley Blackwell, vol. 63(2), pages 237-64, April.
  16. Kihlstrom, Richard E & Laffont, Jean-Jacques, 1979. "A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 719-48, August.
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