Matching and Price Competition
Stanford University Research Paper No. 1818
39 Pages Posted: 6 Oct 2003
Date Written: July 2003
We develop a model in which firms set their salary levels before matching with workers. Wages fall relative to any competitive equilibrium while profits rise almost as much, implying little inefficiency. Furthermore, the best firms gain the most from the system while wages become compressed. We explore the performance of alternative institutions and discuss the recent antitrust case against the National Residency Matching Program in light of our results.
Suggested Citation: Suggested Citation