Matching and Price Competition

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  • 1 January 2004
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      • Published in RePEc
Abstract
We develop a model in which firms set their 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. We explore the performance of alternative institutions and discuss the recent antitrust case against the National Residency Matching Program in light of our results
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