Cooperation, competition, and welfare in a matching market

Helmut Bester and József Sákovics

No 2022/6, Discussion Papers from Free University Berlin, School of Business & Economics

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 D6 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-cdm, nep-com, 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:zbw:fubsbe:20226

DOI: 10.17169/refubium-35308

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