Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/282024 
Year of Publication: 
2022
Series/Report no.: 
Discussion Paper No. 332
Publisher: 
Ludwig-Maximilians-Universität München und Humboldt-Universität zu Berlin, Collaborative Research Center Transregio 190 - Rationality and Competition, München und Berlin
Abstract: 
We investigate the welfare effect of increasing competition in an anonymous two-sided matching market, where matched pairs play an infinitely repeated Prisoner's Dilemma. Higher matching efficiency is usually considered detrimental as it creates stronger incentives for defection. We point out, however, that a reduction in matching frictions also increases welfare because more agents find themselves in a cooperative relationship. We characterize the conditions for which increasing competition increases overall welfare. In particular, this is always the case when the incentives for defection are high.
Subjects: 
cooperation
prisoner's dilemma
competition
welfare
matching
trust building
JEL: 
C72
C73
C78
D06
Document Type: 
Working Paper

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