Too good to fire: Non-assortative matching to play a dynamic game

B-Tier
Journal: Games and Economic Behavior
Year: 2020
Volume: 124
Issue: C
Pages: 491-511

Authors (2)

Sperisen, Benjamin (not in RePEc) Wiseman, Thomas (University of Texas-Austin)

Score contribution per author:

1.005 = (α=2.01 / 2 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We model stable, non-assortative labor-market matchings. We endogenize how transferable utility is: a matched firm and worker play an infinite-horizon game with one-sided moral hazard. Becker's (1973) result that complementarity yields positively assortative matching fails, because increasing match quality harms dynamic incentives: a firm cannot credibly threaten to fire a worker who is productive even with low effort. Thus, firms may prefer lower-type workers who will exert more effort. We offer a new interpretation of efficiency wages: committing to a high wage improves effort incentives indirectly by increasing the firm's willingness to walk away. We also show that the set of stable outcomes has a lattice structure.

Technical Details

RePEc Handle
repec:eee:gamebe:v:124:y:2020:i:c:p:491-511
Journal Field
Theory
Author Count
2
Added to Database
2026-01-29