Premuneration Values and Investments in Matching Markets

George Mailath, Andrew Postlewaite and Larry Samuelson ()
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Larry Samuelson: Department of Economics, Yale University

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: We analyze a model in which agents make investments and then match into pairs to create a surplus. The agents can make transfers to reallocate their pretransfer ownership claims on the surplus. Mailath, Postlewaite, and Samuelson (2013) showed that when investments are unobservable, equilibrium investments are generally inefficient. In this paper we work with a more structured model that is sufficiently tractable to analyze the nature of the investment inefficiencies. We provide conditions under which investment is inefficiently high or low and conditions under which changes in the pretransfer ownership claims on the surplus will be Pareto improving, as well as examine how the degree of heterogeneity on either side of the market affects investment efficiency.

Keywords: Directed search; matching; premuneration value; prematch investments; search (search for similar items in EconPapers)
JEL-codes: C78 D40 D41 D50 D83 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2013-10-14
New Economics Papers: this item is included in nep-cta, nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Premuneration Values and Investments in Matching Markets (2017)
Working Paper: Premuneration Values and Investments in Matching Markets (2015)
Working Paper: Premuneration Values and Investments in Matching Markets (2015)
Working Paper: Premuneration Values and Investments in Matching Markets (2015)
Working Paper: Premuneration Values and Investments in Matching Markets (2012)
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