Decentralized bargaining in matching markets: efficient stationary equilibria and the core

Matthew L. Elliott () and Francesco Nava ()
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Matthew L. Elliott: Department of Economics, Cambridge University and Division of Humanities & Social Sciences, California Institute of Technology
Francesco Nava: Department of Economics, London School of Economics

Theoretical Economics, 2019, vol. 14, issue 1

Abstract: This paper studies market clearing in matching markets. The model is non-cooperative, fully decentralized, and in Markov strategies. Workers and firms bargain with each other to determine who will be matched with whom and at what terms of trade. Once a worker-firm pair reach agreement, they exit the market. Alternative possible matches affect agents' bargaining positions. We ask under which conditions such markets clear efficiently and find that inefficiencies -- mismatch and delay -- feature frequently. Mismatch occurs whenever an agent's bargaining position is at risk of deteriorating. Delay occurs whenever agents expect their bargaining position to improve. Delay can be extensive and structured with vertically differentiated markets endogenously clearing from the top down.

Keywords: Bargaining; matching markets; mismatch; delay; search (search for similar items in EconPapers)
JEL-codes: C78 L14 (search for similar items in EconPapers)
Date: 2019-01-30
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:the:publsh:2416

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