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Tractable Model of Dynamic Many-to-Many Matching†

Tractable Model of Dynamic Many-to-Many Matching† AbstractWe 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 payoff 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. (JEL C78, D62, D83, J64) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Microeconomics American Economic Association

Tractable Model of Dynamic Many-to-Many Matching†

Tractable Model of Dynamic Many-to-Many Matching†

American Economic Journal: Microeconomics , Volume 14 (2) – May 1, 2022

Abstract

AbstractWe 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 payoff 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. (JEL C78, D62, D83, J64)

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Publisher
American Economic Association
Copyright
Copyright © 2022 © American Economic Association
ISSN
1945-7685
DOI
10.1257/mic.20190296
Publisher site
See Article on Publisher Site

Abstract

AbstractWe 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 payoff 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. (JEL C78, D62, D83, J64)

Journal

American Economic Journal: MicroeconomicsAmerican Economic Association

Published: May 1, 2022

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