Matching with Contracts

John William Hatfield and Paul Milgrom

American Economic Review, 2005, vol. 95, issue 4, 913-935

Abstract: We develop a model of matching with contracts which incorporates, as special cases, the college admissions problem, the Kelso-Crawford labor market matching model, and ascending package auctions. We introduce a new "law of aggregate demand" for the case of discrete heterogeneous workers and show that, when workers are substitutes, this law is satisfied by profit-maximizing firms. When workers are substitutes and the law is satisfied, truthful reporting is a dominant strategy for workers in a worker-offering auction/matching algorithm. We also parameterize a large class of preferences satisfying the two conditions.

Date: 2005
Note: DOI: 10.1257/0002828054825466
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Citations: View citations in EconPapers (399)

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