Efficiency in search and matching models: A generalized Hosios condition

Sephorah Mangin*, Benoît Julien

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    9 Citations (Scopus)


    When is entry efficient in markets with search and matching frictions? This paper generalizes the well-known Hosios condition to dynamic environments where the expected match output depends on the market tightness. Entry is efficient when buyers' surplus share is equal to the matching elasticity plus the surplus elasticity (i.e. the elasticity of the expected match surplus with respect to buyers). This ensures agents are paid for their contribution to both match creation and surplus creation. For example, vacancy entry in the labor market is efficient only when firms are compensated for the effect of job creation on both employment and labor productivity.

    Original languageEnglish
    Article number105208
    JournalJournal of Economic Theory
    Publication statusPublished - Apr 2021


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