Efficiency in search and matching models: A generalized Hosios condition

Sephorah Mangin and Benoit Julien

Journal of Economic Theory, 2021, vol. 193, issue C

Abstract: When is entry efficient in markets with search and matching frictions? This paper generalizes the well-known Hosios condition to dynamic environments where the expected match output depends on the market tightness. Entry is efficient when buyers' surplus share is equal to the matching elasticity plus the surplus elasticity (i.e. the elasticity of the expected match surplus with respect to buyers). This ensures agents are paid for their contribution to both match creation and surplus creation. For example, vacancy entry in the labor market is efficient only when firms are compensated for the effect of job creation on both employment and labor productivity.

Keywords: Constrained efficiency; Search and matching; Directed search; Competitive search; Nash bargaining; Hosios condition (search for similar items in EconPapers)
JEL-codes: C78 D83 E24 J64 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Working Paper: Efficiency in Search and Matching Models: A Generalized Hosios Condition (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:193:y:2021:i:c:s0022053121000259

DOI: 10.1016/j.jet.2021.105208

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