American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Self-Enforced Job Matching
American Economic Journal: Microeconomics
(pp. 110–45)
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.Citation
Liu, Ce, Ziwei Wang, and Hanzhe Zhang. 2026. "Self-Enforced Job Matching." American Economic Journal: Microeconomics 18 (2): 110–45. DOI: 10.1257/mic.20240280Additional Materials
JEL Classification
- C72 Noncooperative Games
- C73 Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
- C78 Bargaining Theory; Matching Theory
- D21 Firm Behavior: Theory
- D62 Externalities
- J31 Wage Level and Structure; Wage Differentials
- J41 Labor Contracts