Abstract

http://ssrn.com/abstract=2021900
 
 

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Premuneration Values and Investments in Matching Markets


George J. Mailath


University of Pennsylvania - Department of Economics

Andrew Postlewaite


University of Pennsylvania - Department of Economics

Larry Samuelson


Yale University

March 12, 2012

PIER Working Paper No. 12-008

Abstract:     
We examine markets in which agents make investments and then match into pairs, creating surpluses that depend on their investments and that can be split between the matched agents. In general, each of the matched agents would ”own" part of the surplus in the absence of interagent transfers. Most of the work in the large bargaining-and matching literature ignores this initial ownership of the surplus. We show that when investments are not observable to potential partners, initial ownership affects the efficiency of equilibrium investments and affects the agents' payoffs. In particular, it is possible that reallocating initial ownership could increase welfare on both sides of the match.

Number of Pages in PDF File: 39

Keywords: Directed search, matching, premuneration value, prematch investments, search

JEL Classification: C78, D40, D41, D50, D83

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Date posted: March 15, 2012  

Suggested Citation

Mailath, George J. and Postlewaite, Andrew and Samuelson, Larry, Premuneration Values and Investments in Matching Markets (March 12, 2012). PIER Working Paper No. 12-008. Available at SSRN: http://ssrn.com/abstract=2021900 or http://dx.doi.org/10.2139/ssrn.2021900

Contact Information

George J. Mailath (Contact Author)
University of Pennsylvania - Department of Economics ( email )
160 McNeil Building
3718 Locust Walk
Philadelphia, PA 19104
United States
215-898-7749 (Phone)
215-573-2057 (Fax)
HOME PAGE: http://www.ssc.upenn.edu/~gmailath
Andrew Postlewaite
University of Pennsylvania - Department of Economics ( email )
160 McNeil Building
3718 Locust Walk
Philadelphia, PA 19104
United States
215-898-7350 (Phone)
215-573-2057 (Fax)
HOME PAGE: http://www.econ.upenn.edu/~apostlew
Larry Samuelson
Yale University ( email )
30 Hillhouse Avenue
New Haven, CT 06520-8281
United States
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