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Two-Sided Investment and Matching with Multidimensional Cost Types and Attributes†

Two-Sided Investment and Matching with Multidimensional Cost Types and Attributes† AbstractHeterogeneous 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 multidimensional environments with differentiated agents and no technological multiplicity. Under technological multiplicity, even extreme ex ante heterogeneity need not preclude inefficiencies. (JEL C78, D41, D86) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Microeconomics American Economic Association

Two-Sided Investment and Matching with Multidimensional Cost Types and Attributes†

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Publisher
American Economic Association
Copyright
Copyright © 2018 © American Economic Association
ISSN
1945-7685
DOI
10.1257/mic.20150147
Publisher site
See Article on Publisher Site

Abstract

AbstractHeterogeneous 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 multidimensional environments with differentiated agents and no technological multiplicity. Under technological multiplicity, even extreme ex ante heterogeneity need not preclude inefficiencies. (JEL C78, D41, D86)

Journal

American Economic Journal: MicroeconomicsAmerican Economic Association

Published: Aug 1, 2018

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