Matching and Price Competition

Jeremy Bulow, Jonathan Levin

NBER Working Paper No. 11506
Issued in August 2005
NBER Program(s):   IO

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, implying

little inefficiency. Furthermore, the best firms gain the most from the system while wages become

compressed. We discuss the performance of alternative institutions and the recent antitrust case

against the National Residency Matching Program in light of our results.

(376 K)

Published: Bulow, Jeremy and Jonathan Levin. "Matching And Price Competition," American Economic Review, 2006, v96(3,Jun), 652-668.

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