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Open AccessArticle

Core Stability and Core Selection in a Decentralized Labor Matching Market

1
Department of Humanities, Social and Political Sciences, ETH Zürich, Clausiusstr. 37, Zürich 8092, Switzerland
2
Oxford-Man Institute of Quantitative Finance, Walton Well Road, Oxford, OX2 6ED, UK
*
Authors to whom correspondence should be addressed.
Academic Editors: Thomas D. Jeitschko and Mark J. Tremblay
Games 2016, 7(2), 10; https://doi.org/10.3390/g7020010
Received: 11 January 2016 / Revised: 7 March 2016 / Accepted: 16 March 2016 / Published: 30 March 2016
(This article belongs to the Special Issue Game Theoretic Analyses of Multi-Sided Markets)
We propose a dynamic model of decentralized many-to-one matching in the context of a competitive labor market. Through wage offers and wage demands, firms compete over workers and workers compete over jobs. Firms make hire-and-fire decisions dependent on the wages of their own workers and on the alternative workers available on the job market. Workers bargain for better jobs; either individually or collectively as unions, adjusting wage demands upward/downward depending on whether they are currently employed/unemployed. We show that such a process is absorbed into the core with probability one in finite time. Moreover, within the core, allocations are selected that are characterized by surplus splitting according to a bargaining solution such that (i) firms and workforce share total revenue according to relative bargaining strengths, and (ii) workers receive equal workforce shares above their individual outside options. These results bridge empirical evidence and provide a rich set of testable predictions. View Full-Text
Keywords: cooperative games; core; evolutionary games; matching; generalized Nash bargaining solution; C71; C73; C78; D83 cooperative games; core; evolutionary games; matching; generalized Nash bargaining solution; C71; C73; C78; D83
MDPI and ACS Style

Nax, H.H.; Pradelski, B.S.R. Core Stability and Core Selection in a Decentralized Labor Matching Market. Games 2016, 7, 10.

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