Matching and Price Competition
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.
|Date of creation:||Aug 2005|
|Date of revision:|
|Publication status:||published as Bulow, Jeremy and Jonathan Levin. "Matching And Price Competition," American Economic Review, 2006, v96(3,Jun), 652-668.|
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