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Surplus efficiency of ex ante investments in matching markets with nontransferabilities

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  • Thomas Gall

    (University of Southampton)

Abstract

Does a competitive equilibrium in a matching market provide adequate incentives for investments made before the market when utility is not perfectly transferable? In a one-sided market with a continuum of agents and finite types there is a constrained surplus efficient equilibrium, when a social planner can only affect investments but not payoffs nor matches, if an equal treatment property holds in equilibrium. Sufficient (but not full) utility transferability in a well defined sense implies this property. Ex post efficiency of payoffs (i.e., individual payoffs maximize the surplus in each match) alone is not sufficient to ensure that equilibrium investments maximize aggregate surplus.

Suggested Citation

  • Thomas Gall, 2017. "Surplus efficiency of ex ante investments in matching markets with nontransferabilities," International Journal of Game Theory, Springer;Game Theory Society, vol. 46(1), pages 51-78, March.
    • Handle: RePEc:spr:jogath:v:46:y:2017:i:1:d:10.1007_s00182-015-0522-6
    DOI: 10.1007/s00182-015-0522-6
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    References listed on IDEAS

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    1. Thomas Gall & Patrick Legros & Andrew Newman, 2006. "The Timing of Education," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 427-435, 04-05.
    2. Legros, Patrick & Newman, Andrew, 2010. "Co-ranking mates: Assortative matching in marriage markets," Economics Letters, Elsevier, vol. 106(3), pages 177-179, March.
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    4. Patrick Legros & Andrew F. Newman, 2007. "Beauty Is a Beast, Frog Is a Prince: Assortative Matching with Nontransferabilities," Econometrica, Econometric Society, vol. 75(4), pages 1073-1102, July.
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    7. John C. Harsanyi, 1953. "Cardinal Utility in Welfare Economics and in the Theory of Risk-taking," Journal of Political Economy, University of Chicago Press, vol. 61(5), pages 434-434.
    8. Mailath, George J. & Postlewaite, Andrew & Samuelson, Larry, 2013. "Pricing and investments in matching markets," Theoretical Economics, Econometric Society, vol. 8(2), May.
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    More about this item

    Keywords

    Matching; Assignment models; Investments; Nontransferable utility; Graph theory;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D20 - Microeconomics - - Production and Organizations - - - General
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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