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

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  • Elliott, Matt
  • Nava, Francesco
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 reaches 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.

Suggested Citation

  • Elliott, Matt & Nava, Francesco, 2019. "Decentralized bargaining in matching markets: efficient stationary equilibria and the core," LSE Research Online Documents on Economics 87219, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:87219
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    File URL: http://eprints.lse.ac.uk/87219/
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    References listed on IDEAS

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    Cited by:

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    2. Donna, Javier D. & Schenone, Pablo & Veramendi, Gregory F., 2020. "Networks, frictions, and price dispersion," Games and Economic Behavior, Elsevier, vol. 124(C), pages 406-431.
    3. He, Simin & Wu, Jiabin & Zhang, Hanzhe, 2021. "Experimental and Noncooperative Analyses of Decentralized Matching with Transfers," Working Papers 2021-2, Michigan State University, Department of Economics.
    4. Dilmé, Francesc, 2023. "Bargaining in small dynamic markets," Journal of Economic Theory, Elsevier, vol. 207(C).
    5. Elliott, M. & Talamàs, E., 2020. "Bargaining Foundations for Price Taking in Matching Markets," Cambridge Working Papers in Economics 2070, Faculty of Economics, University of Cambridge.
    6. Milena Wittwer, 2021. "Connecting Disconnected Financial Markets?," American Economic Journal: Microeconomics, American Economic Association, vol. 13(1), pages 252-282, February.

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    More about this item

    Keywords

    bargaining; matching markets; mismatch; delay; search;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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