Matching and Price Competition
American Economic Review · 2006 · Volume 96 · Issue 3
Abstract
We develop a model in which firms set impersonal 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. In light of our results, we discuss the performance of alternative institutions and the recent antitrust case against the National Resident Matching Program. (JEL D44, J41, L44)
Keywords
Analysis of Health Care Markets, Labor Contracts, Antitrust Policy and Public Enterprises, Nonprofit Institutions, and Professional Organizations
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