Matching and Price Competition
NBER Working Paper No. 11506
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.
Published: Bulow, Jeremy and Jonathan Levin. "Matching And Price Competition," American Economic Review, 2006, v96(3,Jun), 652-668.