Self-Enforced Job Matching
Abstract
Complementarities and peer effects are common in matching markets, yet incorporating them often leads to nonexistence of stable matchings. We observe that matching is often an ongoing process rather than a static allocation, where long-lived firms interact over time with short-lived workers. We show that when wages are flexible and firms are sufficiently patient, a dynamically stable solution always exists in many-to-one matching markets — even with complementarities and peer effects. Flexible wages are crucial to our result, as they not only facilitate surplus extraction when firms cooperate in no-poaching agreements but also enhance the threat of punishment through bidding wars. (JEL C72, C73, C78, D21, D62, J31, J41)
Fields of Study & Subjects
Game Theory and Voting Systems
Merger and Competition Analysis
Economic Policies and Impacts
Publication details
- Journal / source
- American Economic Journal Microeconomics
- Volume
- 18
- Issue
- 2
- Pages
- 110–145
- Publication date
- 27 April 2026
- Language
- EN