Heterogeneous buyers and sellers must make investments before entering a continuum assignment market. I show that efficient ex post contracting equilibria (Cole, Mailath and Postlewaite 2001b) exist in a general assignment game framework. I then shed light on what enables and what precludes coordination failures. A simple condition, absence of technological multiplicity, guarantees efficient investments for each pair, but a mismatch of agents may still occur. However, using optimal transport theory, I also show that mismatch is heavily constrained in certain multi-dimensional environments with differentiated agents and no technological multiplicity. Under technological multiplicity, even extreme ex ante heterogeneity need not preclude inefficiencies.
"Two-Sided Investment and Matching with Multidimensional Cost Types and Attributes."
American Economic Journal: Microeconomics,
Bargaining Theory; Matching Theory
Market Structure, Pricing, and Design: Perfect Competition
Economics of Contract: Theory