Competitive Wages in a Match with Ordered Contracts

22 Pages Posted: 14 Jul 2006 Last revised: 15 Sep 2010

See all articles by Muriel Niederle

Muriel Niederle

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: June 2006

Abstract

A recent antitrust lawsuit against the National Residency Matching Program renewed interest in understanding the effects of a centralized match on wages of medical residents. Bulow and Levin (forthcoming) propose a simple model of the NRMP, in which firms set impersonal salaries simultaneously, before matching with workers, and show that a match leads to lower aggregate wages compared to any competitive outcome.This paper models a feature present in the NRMP, ordered contracts, that allows firms to set several contracts while determining the order in which they try to fill these contracts. I show that the low wage equilibrium of Bulow and Levin is not robust to this feature of the NRMP, and competitive wages are once more an equilibrium outcome. Furthermore, a match with ordered contracts has different properties than former models of centralized matches with multiple contracts.

Suggested Citation

Niederle, Muriel, Competitive Wages in a Match with Ordered Contracts (June 2006). NBER Working Paper No. w12334. Available at SSRN: https://ssrn.com/abstract=912444

Muriel Niederle (Contact Author)

Stanford University - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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