Cooperation, Competition, and Welfare in a Matching Market

Helmut Bester and József Sákovics

No 332, Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition

Abstract: We investigate the welfare effect of increasing competition in an anonymous two-sided matching market, where matched pairs play an infinitely repeated Prisoner’s Dilemma. Higher matching efficiency is usually considered detrimental as it creates stronger incentives for defection. We point out, however, that a reduction in matching frictions also increases welfare because more agents find themselves in a cooperative relationship. We characterize the conditions for which increasing competition increases overall welfare. In particular, this is always the case when the incentives for defection are high.

Keywords: cooperation; prisoner's dilemma; competition; welfare; matching; trust building (search for similar items in EconPapers)
JEL-codes: C72 C73 C78 (search for similar items in EconPapers)
Date: 2022-07-21
New Economics Papers: this item is included in nep-des, nep-evo, nep-gth, nep-mic and nep-reg
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Related works:
Journal Article: Cooperation, competition, and welfare in a matching market (2024)
Working Paper: Cooperation, competition, and welfare in a matching market (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:rco:dpaper:332

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