Downstream competition and upstream labor market matching (Q2280043)

This article studies the impact of externalities on the labor market as a two-stage game. The proposed model consists of an upstream labor market and a downstream goods market and aims to model the impact of downstream externalities onto the upstream labor market. In the first stage of the game, firms and managers form a one-to-one matching, whereas the second stage a Cournot competition is carried out between the firm-manager pairs. After an introduction of necessary definitions and background theorems, the author demonstrates that a matching exists under certain conditions. The model is solved using a combination of a stable matching and a Nash equilibrium. Social welfare issues are discussed in the article.