Matching and price competition: beyond symmetric linear costs

Bulow and Levin’s (2006) “Matching and Price Competition” studies a matching model in which hospitals compete for interns by offering wages. We relax the assumption of symmetric linear costs and compare the pricing equilibrium that results to the firm-optimal competitive equilibrium. With linear and asymmetric costs, competition in the pricing equilibrium may not be localized, but all other qualitative comparisons of Bulow and Levin (2006) hold. With non-linear and symmetric costs workers’ average utility in the pricing equilibrium may be higher than in the firm-optimal competitive equilibrium. With asymmetric and non-linear costs, firms need not choose scores from an interval in a pricing equilibrium, which may make competition even less localized. ∗We thank Vijay Krishna and two referees for very helpful comments.