This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. Journals
  3. American Economic Review
  4. September 2005
  5. Matching with Contracts

Matching with Contracts

Download Full Text PDF

Abstract

We develop a model of matching with contracts which incorporates, as special cases, the college admissions problem, the Kelso-Crawford labor market matching model, and ascending package auctions. We introduce a new "law of aggregate demand" for the case of discrete heterogeneous workers and show that, when workers are substitutes, this law is satisfied by profit-maximizing firms. When workers are substitutes and the law is satisfied, truthful reporting is a dominant strategy for workers in a worker-offering auction/matching algorithm. We also parameterize a large class of preferences satisfying the two conditions.

Citation

Hatfield, John William, and Paul R. Milgrom. 2005. "Matching with Contracts." American Economic Review, 95 (4): 913-935. DOI: 10.1257/0002828054825466

JEL Classification

  • C78 Bargaining Theory; Matching Theory
  • J41 Labor Contracts