IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/11506.html
   My bibliography  Save this paper

Matching and Price Competition

Author

Listed:
  • Jeremy Bulow
  • Jonathan Levin

Abstract

We develop a model in which firms set impersonal salary levels before matching with workers. Salaries fall relative to any competitive equilibrium while profits rise by almost as much, implying little inefficiency. Furthermore, the best firms gain the most from the system while wages become compressed. We discuss the performance of alternative institutions and the recent antitrust case against the National Residency Matching Program in light of our results.

Suggested Citation

  • Jeremy Bulow & Jonathan Levin, 2005. "Matching and Price Competition," NBER Working Papers 11506, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:11506
    Note: IO
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w11506.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Crawford, Vincent P & Knoer, Elsie Marie, 1981. "Job Matching with Heterogeneous Firms and Workers," Econometrica, Econometric Society, vol. 49(2), pages 437-450, March.
    2. Michael R. Baye & Dan Kovenock & Casper G. Vries, 2008. "Rigging the lobbying process: An application of the all-pay auction," Springer Books, in: Roger D. Congleton & Kai A. Konrad & Arye L. Hillman (ed.), 40 Years of Research on Rent Seeking 2, pages 331-336, Springer.
    3. Jeremy Bulow & Jonathan Levin, 2006. "Matching and Price Competition," American Economic Review, American Economic Association, vol. 96(3), pages 652-668, June.
    4. Kamecke, Ulrich, 1998. "Wage Formation in a Centralized Matching Market," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 33-53, February.
    5. Roth, Alvin E, 1984. "The Evolution of the Labor Market for Medical Interns and Residents: A Case Study in Game Theory," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 991-1016, December.
    6. Posner, Richard A. & Avery, Christopher & Jolls, Christine & Roth, Alvin, 2001. "The Market for Federal Judicial Law Clerks," Scholarly Articles 2623748, Harvard University Department of Economics.
    7. Alvin E Roth & Richard A Posner & Christine Jolls & Christopher Avery, 2007. "The New Market for Federal Judicial Law Clerks," Levine's Bibliography 843644000000000288, UCLA Department of Economics.
    8. Roth, Alvin E & Xing, Xiaolin, 1994. "Jumping the Gun: Imperfections and Institutions Related to the Timing of Market Transactions," American Economic Review, American Economic Association, vol. 84(4), pages 992-1044, September.
    9. Elliott Peranson & Alvin E. Roth, 1999. "The Redesign of the Matching Market for American Physicians: Some Engineering Aspects of Economic Design," American Economic Review, American Economic Association, vol. 89(4), pages 748-780, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alvin Roth, 2008. "Deferred acceptance algorithms: history, theory, practice, and open questions," International Journal of Game Theory, Springer;Game Theory Society, vol. 36(3), pages 537-569, March.
    2. Alvin E. Roth, 2012. "Marketplace Institutions Related to the Timing of Transactions: Reply to Priest," Journal of Labor Economics, University of Chicago Press, vol. 30(2), pages 479-494.
    3. Alvin E. Roth, 2009. "What Have We Learned from Market Design?," Innovation Policy and the Economy, University of Chicago Press, vol. 9(1), pages 79-112.
    4. Muriel Niederle & Alvin E. Roth, 2009. "The Effects of a Centralized Clearinghouse on Job Placement, Wages, and Hiring Practices," NBER Chapters, in: Studies of Labor Market Intermediation, pages 235-271, National Bureau of Economic Research, Inc.
    5. Scott Duke Kominers & Alexander Teytelboym & Vincent P Crawford, 2017. "An invitation to market design," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 33(4), pages 541-571.
    6. Alvin E. Roth, 2010. "Marketplace Institutions Related to the Timing of Transactions," NBER Working Papers 16556, National Bureau of Economic Research, Inc.
    7. Dimakopoulos, Philipp D. & Heller, C.-Philipp, 2019. "Matching with waiting times: The German entry-level labor market for lawyers," Games and Economic Behavior, Elsevier, vol. 115(C), pages 289-313.
    8. C. Nicholas McKinney & Muriel Niederle & Alvin E. Roth, 2005. "The Collapse of a Medical Labor Clearinghouse (and Why Such Failures Are Rare)," American Economic Review, American Economic Association, vol. 95(3), pages 878-889, June.
    9. Muriel Niederle & Alvin E. Roth, 2001. "Unraveling Reduces the Scope of an Entry Level Labor Market: Gastroenterology With and Without a Centralized Match," NBER Working Papers 8616, National Bureau of Economic Research, Inc.
    10. Muriel Niederle & Alvin E. Roth, 2005. "The Gastroenterology Fellowship Market: Should There Be a Match?," American Economic Review, American Economic Association, vol. 95(2), pages 372-375, May.
    11. Muriel Niederle & Alvin E. Roth, 2004. "Market Culture: How Norms Governing Exploding Offers Affect Market Performance," Levine's Bibliography 122247000000000018, UCLA Department of Economics.
    12. Halaburda, Hanna, 2010. "Unravelling in two-sided matching markets and similarity of preferences," Games and Economic Behavior, Elsevier, vol. 69(2), pages 365-393, July.
    13. C. Nicholas McKinney & Muriel Niederle & Alvin E. Roth, 2003. "The collapse of a medical clearinghouse (and why such failures are rare)," NBER Working Papers 9467, National Bureau of Economic Research, Inc.
    14. Erev, Ido & Roth, Alvin E. & Slonim, Robert L. & Barron, Greg, 2002. "Predictive value and the usefulness of game theoretic models," International Journal of Forecasting, Elsevier, vol. 18(3), pages 359-368.
    15. Muriel Niederle & Alvin E. Roth & M. Utku Ünver, 2013. "Unraveling Results from Comparable Demand and Supply: An Experimental Investigation," Games, MDPI, vol. 4(2), pages 1-40, June.
    16. Haruvy, Ernan & Roth, Alvin E. & Unver, M. Utku, 2006. "The dynamics of law clerk matching: An experimental and computational investigation of proposals for reform of the market," Journal of Economic Dynamics and Control, Elsevier, vol. 30(3), pages 457-486, March.
    17. Ambuehl, Sandro & Groves, Vivienne, 2020. "Unraveling over time," Games and Economic Behavior, Elsevier, vol. 121(C), pages 252-264.
    18. Alvin E. Roth, 2007. "Repugnance as a Constraint on Markets," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 37-58, Summer.
    19. Alvin E Roth & Muriel Niederle, 2007. "Making Markets Thick: Designing Rules for Offers and Acceptances," Levine's Bibliography 843644000000000142, UCLA Department of Economics.
    20. Sandro Ambuehl & Vivienne Groves, 2017. "Unraveling Over Time," CESifo Working Paper Series 6739, CESifo.

    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:11506. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.