Matching and Price Competition
33 Pages Posted: 8 Sep 2005
Date Written: August 2005
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, implyinglittle inefficiency. Furthermore, the best firms gain the most from the system while wages becomecompressed. We discuss the performance of alternative institutions and the recent antitrust caseagainst the National Residency Matching Program in light of our results.
Suggested Citation: Suggested Citation