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Random Decentralized Market Processes for Stable Job Matchings with Competitive Salaries

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JournalJournal of Economic Theory
DateAccepted/In press - 9 Apr 2016
DatePublished (current) - 19 Apr 2016
Volume165
Number of pages12
Pages (from-to)25-36
Original languageEnglish

Abstract

We analyze a decentralized process in a basic labor market where finitely
many heterogeneous firms and workers meet directly and randomly in pursuit of
higher payoffs over time and agents may behave myopically. We introduce a general
random decentralized market process that almost surely converges in finite time
to a competitive equilibrium of the market. A key proposition en route to this
result exhibits a finite sequence of successive bilateral trades from an arbitrary
initial market state to a stable matching between firms and workers with a
scheme of competitive salary offers.

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