Cooperation, competition, and welfare in a matching market

Helmut Bester and József Sákovics

Games and Economic Behavior, 2024, vol. 143, issue C, 357-369

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: 2024
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Related works:
Working Paper: Cooperation, Competition, and Welfare in a Matching Market (2022)
Working Paper: Cooperation, competition, and welfare in a matching market (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:143:y:2024:i:c:p:357-369

DOI: 10.1016/j.geb.2023.12.003

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