Fox (2008) - An Empirical Repeated Matching Game Applied to Market

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  • The closeness in terms of observables of an agent's old and new match partners can tell us a lot about the unobservables governing switching.
  • The hypothesis is that firms closer to other firms in characteristic space operate in thicker labor markets which will encourage workers to switch, other factors held constant. After estimating the model's parameters, he examines to what extent workers will move to open positions in a brand new firm. To this end, compute the equilibrium to a labor market with the entrant firm, and examine how many of its jobs are likely to be filled.
  • Outline of the model: Each time period, a matching market clears so that all agents are matched. Prices are chosen to that every period supply equals demand at all pairs of worker and firm states. Then all agents state variables evolve and during the next period another matching game is held.