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Matching Information

Chade, H; Eeckhout, J; (2018) Matching Information. Theoretical Economics , 13 (1) pp. 377-414. 10.3982/TE1820. Green open access

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Abstract

We analyze the optimal allocation of experts to teams, where experts differ in the precision of their information, and study the assortative matching properties of the resulting assignment. The main insight is that in general it is optimal to diversify the composition of the teams, ruling out positive assortative matching. This diversification leads to negative assortative matching when teams consist of pairs of experts. And when experts' signals are conditionally independent, all teams have similar precision. We also show that if we allow experts to join multiple teams, then it is optimal to allocate them equally across all teams. Finally, we analyze how to endogenize the size of the teams, and we extend the model by introducing heterogeneous firms in which the teams operate.

Type: Article
Title: Matching Information
Open access status: An open access version is available from UCL Discovery
DOI: 10.3982/TE1820
Publisher version: https://doi.org/10.3982/TE1820
Language: English
Additional information: Copyright © 2018 The Authors. This is an open access article under the terms of the Creative Commons Attribution‐NonCommercial License (http://creativecommons.org/licenses/by-nc/4.0/), which permits use, distribution and reproduction in any medium, provided the original work is properly cited and is not used for commercial purposes.
Keywords: Assortative Matching, Teams, Diversification, Correlation.
UCL classification: UCL
UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/1563618
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