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Free keywords:
Matching, Horizontal Differentiation, Marriage Markets
Abstract:
We study a matching model with heterogeneous agents, nontransferable utility and
search frictions. Agents differ along a horizontal dimension (e.g. taste) and a vertical
dimension (e.g. income). Agents’ preferences coincide only in the vertical
dimension. This approach introduces individual preferences in this literature as
seems suitable in applications like labor markets (e.g. regional preferences). We
analyze how the notion of assortativeness generalizes to integration or segregation
outcomes depending on search frictions. Contrary to results from the purely vertical
analysis, here, agents continuously adjust their reservation utility strategies
to changing search frictions. The model is easily generalizable in the utility specification,
the distribution of taste-related payoffs and the number of vertical types.
Extreme utility specifications can be treated as a case of horizontal heterogeneity only.
