In the context of one-to-one matching markets, we study myopic-farsighted stable sets, which are internally and externally stable when myopic agents consider immediate payoffs from their deviations, while farsighted agents anticipate counter-deviations and consider final payoffs. We constructively prove the existence of a (rational expectations) myopic-farsighted stable set, in which farsighted agents receive a single payoff while myopic agents may receive multiple payoffs. Our existence result extends to settings with enforcing coalitions of arbitrary size, yielding coalitional myopic-farsighted stable sets, and to settings where not all members of an enforcing coalition must strictly gain, yielding myopic-farsighted weakly stable sets. When all farsighted agents have unit demand, our results also extend to many-to-one matching markets. As a key corollary, we provide a foundation for the efficiency-adjusted deferred acceptance algorithm by showing that its outcome constitutes a singleton myopic-farsighted stable set when one side is farsighted and the other is myopic.
This paper develops a macroeconomic model that combines an incomplete‐markets overlapping‐generations economy with a job ladder featuring sequential wage bargaining, endogenous search effort of employed and non‐employed workers, and differences in match quality. With these ingredients, our model provides a joint microfoundation for the three main inputs in aggregate production: capital, employment, and labor efficiency. The calibrated model offers a good fit to the empirical age profiles of search activity, job‐finding rates, wages, and savings. We use the model to analyze the impact of tax and transfer policies for labor market dynamics and aggregate economic activity via capital, employment, and labor efficiency channels. Lower unemployment benefits and a less progressive tax schedule bring about welfare losses for a newborn worker which are mainly driven by higher consumption risk and costlier search effort; both policies have differential effects along the age, income, and wealth dimensions.
Customs data reveal the heterogeneity and granularity of relationships among buyers and sellers, showing how more exports to a destination break down into more firms selling there and more buyers per exporter. We develop a quantitative general equilibrium model of firm‐to‐firm matching that builds on this insight to separate the roles of iceberg costs and matching frictions in gravity. In the cross section, we find matching frictions as important as iceberg costs in impeding trade, and more sensitive to distance. Because domestic and imported intermediates compete directly with labor in performing production tasks, our model also fits the heterogeneity of labor shares across French producers. Applying the framework to the 2004 expansion of the European Union, reduced iceberg costs and reduced matching frictions contributed equally to the increase in French exports to the new members. While workers benefited overall, those competing most directly with imports gained less, even losing in some countries entering the EU.