Matching with Nonexclusive Contracts

Abstract

A variety of empirical papers document the coexistence of exclusive and nonexclusive contracts within a given market across a multitude of industries. However, the theoretical literature has not been able to generate a differentiable model with the coexistence of these contracts. I rectify the gap in the literature by developing a theoretical model of two-sided matching, in which principals and agents choose between exclusive and nonexclusive contracts with cost-of-effort inefficiencies. I find that the coexistence of contracts relies on cost-sharing between principals, relative bargaining power, and an endogenous outside option. I also find that the pattern of contracts is monotonic with respect to the type distributions of principals and agents.

Keywords

• two-sided matching
• contract theory
• organizational economics