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Unraveling in Matching Markets By HAO LI AND SHERWIN ROSEN * We use a two-period matching model with initial uncertainty about productivities of participants to analyze incentives for early contracting or unraveling. Unrav-eling provides insurance in the absence of complete markets, but causes ineffi.-cient assignments. Unraveling is more ...
12. Okt. 2023 · It sets the groundwork for holistic comprehension of market anomalies, suggesting future research directions such as exploring new data sources, comprehensive theoretical modeling, and the role of technology, market regulations, and environmental changes on market anomalies.
assessments. The treatment with the hard task entails more unraveling and thereby leads to lower efficiency, less stability, and it shifts payoffs from high to low-quality firms. JEL Classification: C92, D47, D83 Keywords: Market unraveling; labor markets; experiment; self-confidence; firm strategy
- Definition 3
- Definition 4
- Open Offers only
- Proposition 1
- Lemma 1
- Definition 5
- Proposition 2
- Example 1
- Proposition 3
- Example 2
An equilibrium without unravelingis an equilibrium where no relevant firms make any offers until the last period. In an equilibrium without unraveling, no actions are taken by relevant firms in Period 1. In Period 2, two cases are considered separately: (i) when W\\ge F, f_{F} makes an offer to w_{W}, f_{F-1} to w_{W-1},..., f_{1} to w_{W-F+1}, and ...
An equilibrium with full unravelingis an equilibrium where every relevant firm makes an early offer in Period 1. In an equilibrium with full unraveling, after \\hat{\\succ } is revealed in Period 1, two cases are considered separately: (i) when W\\ge F, f_{F} makes an offer to type \\hat{r}=W, f_{F-1} to \\hat{r}=W-1, ..., f_{1} to \\hat{r}=W-F+1, and al...
Consider the case where firms can only make open offers due to the culture, norms, or policies in a market environment.Footnote 6The following proposition describes the equilibrium outcome.
When firms are not allowed to make exploding offers, there only exist equilibria without unraveling; the stable matching is the unique equilibrium outcome. While the full proof is provided in the appendix, the basic intuition is clear. In Period 1, every type of worker has a positive probability of having the highest quality in the true state. Ther...
In an equilibrium in undominated strategies, firms f_{F-1}, f_{F-2}, ..., and f_{1}never make an open offer in Period 1 when they are allowed to make exploding offers. The best firm f_{F} is indifferent between an open offer and an exploding offer since neither of them will be rejected by any worker. In Period 2, every firm is indifferent because a...
The signal-suggested type of a firm f_{j}is a function defined as The signal-suggested firm of a type \\hat{r}is a function defined as A firm and its signal-suggested type, or a type of worker and its signal-suggested firm, are called a signal-suggested pair.
When firms are allowed to make exploding offers, an equilibrium without unraveling always exists if 1. (i) the market has an extreme excess supply of labor; or 2. (ii) the market has a moderate excess supply of labor and a sufficiently inaccurate signal. Mathematically speaking, an equilibrium without unraveling always exists if (i) W\\ge 2F, or (ii...
In a market with 3 firms and 3 workers, an equilibrium without unraveling yields the following assortative matching: Consider a deviation between f_{2} and a worker of type \\hat{r}=3. Given the posteriors on this type in Period 1, the offer will be accepted if 2\\ge \\left( \\alpha +\\frac{1-\\alpha }{3}\\right) \\times 3+\\frac{1-\\alpha }{3}\\times 1+\\frac...
When firms are allowed to make exploding offers, an equilibrium without unraveling never exists if 1. (i) the market has an excess demand of labor and a sufficiently accurate signal; or 2. (ii) the market has a moderate excess supply of labor and a sufficiently accurate signal. Mathematically speaking, an equilibrium without unraveling never exists...
1. When \\alpha =0.51, F=5, and W=8, there does not exist an equilibrium without unraveling: given \\underline{j^{A}}\\thickapprox 0.7 and \\overline{j^{O}}=1.5, we know that the signal-suggested pair...2. When \\alpha =0.51, F=7, and W=12, an equilibrium without unraveling can sustain since there is no integer between \\underline{j^{A}}\\thickapprox 1.2 and \\overline{j^{O}}=1.5.- Siqi Pan
- siqi.pan@unimelb.edu.au
- 2018
3. März 2023 · The Review of Economics and Statistics (2023) 105 (2): 237–257. https://doi.org/10.1162/rest_a_01070. Article history. Cite. PDF. Permissions. Share. Views. Abstract. Insurance markets often feature consumer sorting along both an extensive margin (whether to buy) and an intensive margin (which plan to buy).
When Matching Markets Unravel? Theory and Evidence from Federal Judicial Clerkships. Daniel L. Chen, Yinghua He, Takuro Yamashita. Preliminary and Incomplete. Abstract. We study the judge-clerk match, a market plagued by unraveling. Evidence from a unique. dataset on match and production shows that (1) agents on either side have similar preferences
J. uan S ebastián P ereyra. ECARES—Solvay Brussels School of Economics and Management, Université libre de Bruxelles and. F.R.S.-FNRS. We present a theoretical explanation of inefficient early matching in matching markets. Our explanation is based on strategic complementarities and strategic unraveling.
