Efficient non-contractible investments in large economies. (Q1347820)

The authors describe a two-sided matching model in which buyers and sellers make investments prior to matching. Once matched, buyers and sellers bargain over the price by regarding outside options. Efficient decisions can be sustained in equilibrium. Inefficiences being able to arise in equilibrium are characterized. It is shown that equilibria will be constraint efficient, and that the degree of diversity in a large market has implications for the extent of any inefficiency.