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

Accepted version
Peer-reviewed

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Authors

Elliott, ML 
Nava, F 

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.

Description

Keywords

bargaining, matching markets, mismatch, delay, search

Journal Title

Theoretical Economics

Conference Name

Journal ISSN

1933-6837

Volume Title

14

Publisher

Econometric Society
Sponsorship
European Research Council (757229)
We gratefully acknowledge the research support and hospitality of Microsoft Research New England. Matt Elliott acknowledges financial support from NSF Grant 1518941.