Two-Sided Investments and Matching with Multi-Dimensional Types and Attributes

Dizdar, Deniz

doi:10.2139/ssrn.2357087

Cited by 5 publications

(20 citation statements)

References 28 publications

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“…Dizdar (2012) followed this approach and Cole, Mailath, and Postlewaite (2001b, Appendix B) also considered this possibility. When utility is perfectly transferable, this approach makes powerful techniques from the optimal transport literature (cf.…”

Section: Allocationsmentioning

confidence: 99%

“…Dizdar (2012) has noted that these conditions can be interpreted as the requirement that (b s) is a Nash equilibrium in the full appropriation game in which both i and j have the value function as the payoff function. When utility is imperfectly transferable, there is no analogous simplification.…”

Section: Ex Post Equilibriummentioning

confidence: 99%

“…The first, suggested by Dizdar (2012), is to seek conditions on preferences under which, for any pair of types (i j), conditional efficiency of an exchange for that pair implies (unconditional) exchange efficiency for that pair. The second approach, pioneered by Cole, Mailath, and Postlewaite (2001b, Section 6), uses assumptions about the distribution of types in the economy and about the relationship between the preferences of various types.…”

Section: Exchange Efficiency Of Ex Post Equilibriamentioning

confidence: 99%

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Investment and Competitive Matching

Nöldeke

Samuelson

2014

SSRN Journal

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We study markets in which agents first make investments and are then matched into potentially productive partnerships. Equilibrium investments and the equilibrium matching will be efficient if agents can simultaneously negotiate investments and matches, but we focus on markets in which agents must first sink their investments before matching. Additional equilibria may arise in this sunk-investment setting, even though our matching market is competitive. These equilibria exhibit inefficiencies that we can interpret as coordination failures. All allocations satisfying a constrained efficiency property are equilibria, and the converse holds if preferences satisfy a separability condition. We identify sufficient conditions (most notably, quasiconcave utilities) for the investments of matched agents to satisfy an exchange efficiency property as well as sufficient conditions (most notably, a single crossing property) for agents to be matched positive assortatively, with these conditions then forming the core of sufficient conditions for the efficiency of equilibrium allocations.

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Section: Allocationsmentioning

confidence: 99%

Section: Ex Post Equilibriummentioning

confidence: 99%

Section: Exchange Efficiency Of Ex Post Equilibriamentioning

confidence: 99%

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Investment and Competitive Matching

Nöldeke

Samuelson

2014

SSRN Journal

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“…Speci cally, both here and in Jerez (2014), we adopt the linear programming approach used by Shapley (1955), Shapley and Shubik (1972), and Grestky, Zame (1992, 1999) to study frictionless matching models with transferable utility. (See also more recent work by Chiappori, McCann, and Nesheim (2010) and Dizdar (2015), among others). Speci cally, we show that constrained e cient allocations can be determined as solutions to a linear programming (LP) problem, whereas the hedonic wage function supporting these allocations and the associated expected payo s for workers and rms correspond to the solutions of the dual of that linear program.…”

Section: Introductionmentioning

confidence: 86%

“…It is worth noting that models with these features do exist in the frictionless matching literature (e.g. Cole, Mailath, and Postlewaite (2001), Peters (2009) andFelli andRoberts (2016) allow for one-dimensional two-sided heterogeneity, and Dizdar (2015) allows for multidimensional two-sided heterogeneity). 4 Following the latter literature, we consider an environ-3 Acemoglu (1996) studies a search and bargaining model where workers also make ex-ante investments.…”

Section: Introductionmentioning

confidence: 99%

Competitive search equilibrium with multidimensional heterogeneity and two-sided ex-ante investments

Jerez

2017

Journal of Economic Theory

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We analyze a competitive search environment where heterogeneous workers and firms make costly investments (e.g. in education and physical capital, respectively) before they enter the labor market. A key novelty with respect to existing work is that we allow for multidimensional heterogeneity on both sides of the market. Our environment features transferable utility and symmetric information. As in classical hedonic models, wages depend both on the job's and on the worker's match-relevant characteristics. Yet the presence of search frictions implies that (unlike in those models) markets do not clear. The hedonic wage function and probabilities of finding and filling different jobs are determined endogenously in a competitive search equilibrium. We show that constrained efficient allocations can be determined as optimal solutions to a linear programming problem, whereas the wage function supporting these allocations and associated expected payoffs for workers and firms correspond to the solutions of the `dual' of that linear program. We use this characterization to show that a competitive search equilibrium exist and is constrained efficient under very general conditions. Jerez (2014) makes a similar point in the context of a model where all the match-relevant characteristics of the traders are exogenous. Here we extend the analysis to allow for two-sided ex-ante investments which are potentially multidimensional. The fact that linear programming techniques have been used for the structural estimation of frictionless matching models suggests that our framework is potentially useful for empirical studies of labor markets and other hedonic markets (like that for housing) where search frictions are prevalent Journal of Economic Literature Classification Numbers: D50, D61, D83.

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