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Decentralized bargaining in matching markets: efficient stationary equilibria and the core

Elliott, Matt and Nava, Francesco (2019) Decentralized bargaining in matching markets: efficient stationary equilibria and the core. Theoretical Economics, 14 (1). pp. 211-251. ISSN 1933-6837

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Identification Number: 10.3982/TE2416

Abstract

This paper studies market clearing in matching markets. The model is non-cooperative, fully decentralized, and in Markov strategies. Workers and firms bargain with each other to determine who will be matched with whom and at what terms of trade. Once a worker–firm pair reaches agreement, they exit the market. Alternative possible matches affect agents' bargaining positions. We ask under which conditions such markets clear efficiently and find that inefficiencies—mismatch and delay—feature frequently. Mismatch occurs whenever an agent's bargaining position is at risk of deteriorating. Delay occurs whenever agents expect their bargaining position to improve. Delay can be extensive and structured with vertically differentiated markets endogenously clearing from the top down.

Item Type: Article
Official URL: https://econtheory.org/
Additional Information: © 2018 The Authors
Divisions: Economics
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HC Economic History and Conditions
JEL classification: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C78 - Bargaining Theory; Matching Theory
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L14 - Transactional Relationships; Contracts and Reputation; Networks
Sets: Departments > Economics
Date Deposited: 14 Mar 2018 12:08
Last Modified: 22 Jun 2019 23:01
Projects: 1518941
Funders: National Science Foundation
URI: http://eprints.lse.ac.uk/id/eprint/87219

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