Tractable Model of Dynamic Many-to-Many Matching
- (pp. 1-43)
Abstract
We develop a tractable, dynamic, and strategic model of many-to-many matching with payoff externalities across links. The joint dynamic surplus or certain second properties of individual utilities, like pay-off externalities, can typically be identified. We characterize a class of interior equilibria as solutions to an optimization problem with an objective function that consists of welfare minus an inefficiency loss term. In equilibrium, too few matches are formed. We compare transferable and nontransferable versions of the model; the equilibria of the two versions are equivalent up to a rescaling of parameters. We describe the asymptotic limits of disappearing frictions.Citation
Pęski, Marcin. 2022. "Tractable Model of Dynamic Many-to-Many Matching." American Economic Journal: Microeconomics, 14 (2): 1-43. DOI: 10.1257/mic.20190296Additional Materials
JEL Classification
- C78 Bargaining Theory; Matching Theory
- D62 Externalities
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- J64 Unemployment: Models, Duration, Incidence, and Job Search
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