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Matching and Price Competition

  • Jeremy Bulow
  • Jonathan Levin

We develop a model in which firms set impersonal salary levels before matching with workers. Salaries fall relative to any competitive equilibrium while profits rise by almost as much, implying little inefficiency. Furthermore, the best firms gain the most from the system while wages become compressed. We discuss the performance of alternative institutions and the recent antitrust case against the National Residency Matching Program in light of our results.

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File URL: http://www.nber.org/papers/w11506.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11506.

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Date of creation: Aug 2005
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Publication status: published as Bulow, Jeremy and Jonathan Levin. "Matching And Price Competition," American Economic Review, 2006, v96(3,Jun), 652-668.
Handle: RePEc:nbr:nberwo:11506
Note: IO
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  1. Crawford, Vincent P & Knoer, Elsie Marie, 1981. "Job Matching with Heterogeneous Firms and Workers," Econometrica, Econometric Society, vol. 49(2), pages 437-50, March.
  2. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1991. "Rigging The Lobbying Process: An Application Of The All- Pay Auction," Purdue University Economics Working Papers 1002, Purdue University, Department of Economics.
  3. Alvin E Roth & Richard A Posner & Christine Jolls & Christopher Avery, 2007. "The New Market for Federal Judicial Law Clerks," Levine's Bibliography 843644000000000288, UCLA Department of Economics.
  4. Roth, Alvin E & Xing, Xiaolin, 1994. "Jumping the Gun: Imperfections and Institutions Related to the Timing of Market Transactions," American Economic Review, American Economic Association, vol. 84(4), pages 992-1044, September.
  5. Elliott Peranson & Alvin E. Roth, 1999. "The Redesign of the Matching Market for American Physicians: Some Engineering Aspects of Economic Design," American Economic Review, American Economic Association, vol. 89(4), pages 748-780, September.
  6. Jeremy Bulow & Jonathan Levin, 2005. "Matching and Price Competition," NBER Working Papers 11506, National Bureau of Economic Research, Inc.
  7. Roth, Alvin E, 1984. "The Evolution of the Labor Market for Medical Interns and Residents: A Case Study in Game Theory," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 991-1016, December.
  8. Posner, Richard A. & Avery, Christopher & Jolls, Christine & Roth, Alvin, 2001. "The Market for Federal Judicial Law Clerks," Scholarly Articles 2623748, Harvard University Department of Economics.
  9. Ulrich Kamecke, 1993. "Wage Formation in a Centralized Matching Market," Discussion Paper Serie A 422, University of Bonn, Germany.
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