Working Paper: CEPR ID: DP2396
Authors: Patrick Legros; Andrew Newman
Abstract: We study frictionless matching models in large production economies with and without market imperfections and/or incentive problems. We provide necessary and sufficient distribution-free conditions for monotone matching which depend on the relationship between what we call the segregation payoff - a generalization of the individually rational payoff - and the feasible set for a pair of types. Imperfections have two distinct effects that are relevant for equilibrium matching patterns: they can overwhelm the complementarity properties of the production technology and they can introduce nontransferabilities that make equilibrium matching inefficient. We also use our framework to reveal the source of differences in the comparative static properties of some models in the literature and to explore the effects of distribution on the equilibrium matching pattern.
Keywords: assortative matching; imperfect markets; contracts; organizations
JEL Codes: D30; D51; L10; L22; L23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| surplus (H62) | matching patterns (C52) |
| market imperfections (D43) | non-monotonic matching patterns (C52) |
| utility transferability (L97) | matching efficiency (C52) |
| structure of the model (C59) | matching outcomes (C52) |
| surplus satisfies weak increasing differences (D10) | positive assortative matching (C78) |
| spiraling condition (C62) | positive assortative matching (C78) |