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Beauty Is a Beast,Frog Is a Prince: Assortative Matching with Nontransferabilities
Authors:Patrick Legros  Andrew F Newman
Institution:1. ECARES, Université Libre de Bruxelles, Avenue F.D. Roosevelt 50, C.P. 114, 1050 Brussels, Belgium, and CEPR;2. plegros@ulb.ac.be, http://homepages.ulb.ac.be/~plegros;3. Dept. of Economics, Boston University, 270 Bay State Road, Boston, MA 02215, U.S.A., and CEPR;4. afnewman@bu.edu

We thank Ken Binmore, Patrick Bolton, Maristella Botticini, Bengt Holmstrom, Hide Ichimura, Boyan Jovanovic, Eric Maskin, Meg Meyer, Nicola Pavoni, Wolfgang Pesendorfer, Ilya Segal, Lones Smith, a co-editor, and three anonymous referees, as well as seminar participants at Berkeley, Bonn, BU, Caltech, Gerzensee, Harvard/MIT, Northwestern, Princeton, Stanford, Toulouse, UCL, UCSD, UCSB, and ULB, for useful comments and discussion. Legros benefited from the financial support of the Communauté Française de Belgique (projects ARC 98/03-221 and ARC 00/05-252) and EU TMR Network contract of FMRX-CT98-0203. Newman acknowledges support as the Richard B. Fisher Member, Institute for Advanced Study, Princeton, and as a Peter B. Kenen Fellow, Department of Economics, Princeton University.

Abstract:We present sufficient conditions for monotone matching in environments where utility is not fully transferable between partners. These conditions involve not only complementarity in types of the total payoff to a match, as in the transferable utility case, but also monotonicity in type of the degree of transferability between partners. We apply our conditions to study some models of risk sharing and incentive problems, deriving new results for predicted matching patterns in those contexts.
Keywords:Assortative matching  nontransferable utility  risk sharing  intrahousehold allocation  principal-agent
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