Two-Sided Investment and Matching with Multidimensional Cost Types and Attributes

Deniz Dizdar

American Economic Journal: Microeconomics, 2018, vol. 10, issue 3, 86-123

Abstract: Heterogeneous buyers and sellers must make investments before entering a continuum assignment market. I show that efficient ex post contracting equilibria (Cole, Mailath and Postlewaite 2001b) exist in a general assignment game framework. I then shed light on what enables and what precludes coordination failures. A simple condition, absence of technological multiplicity, guarantees efficient investments for each pair, but a mismatch of agents may still occur. However, using optimal transport theory, I also show that mismatch is heavily constrained in certain multi-dimensional environments with differentiated agents and no technological multiplicity. Under technological multiplicity, even extreme ex ante heterogeneity need not preclude inefficiencies.

JEL-codes: C78 D41 D86 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/mic.20150147
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Citations: View citations in EconPapers (14)

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