Decentralized Matching Markets with Endogenous Salaries

Hideo Konishi () and Margarita Sapozhnikov ()

No 654, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: In a Shapley-Shubik assignment problem with a supermodular output matrix, we consider games in which each firm makes a take-it-or-leave-it salary offer to one applicant, and a match is made only when the offer is accepted by her. We consider both one-shot and multistage games. In either game, we show that there can be many equilibrium salary vectors which are higher or lower than the minimal competitive salary vector. If we exclude artificial equilibria, applicants' equilibrium salary vectors are bounded above by the minimal competitive salary vector, while firms' equilibrium payoff vectors are bounded below by the payoff vector under the minimal competitive salary vector. This suggests that adopting the minimal competitive salary vector as the equilibrium outcome in decentralized markets does not have a strong justification.

JEL-codes: C73 C78 J01 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gth and nep-mic
Date: 2006-11-10, Revised 2008-01-03
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Published, Games and Economic Behavior, 2008, 64:193-218.

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Journal Article: Decentralized matching markets with endogenous salaries (2008)
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