Matching Firms and Workers through Intermediaries

Abstract

In some labour markets, firms and workers are constrained to match with each other via intermediaries that mutually connect them. We study these markets via a model that synthesises tripartite matching with a `trading network' feature, by formulating a simple agency game in which intermediaries first make offers to connected firms and workers, and then firms and workers accept at most one of these offers. We identify restrictions on preferences of intermediaries that restore stability and side-optimality to equilibrium outcomes of the agency game. Our results shed light on the implicit restrictions imposed on clearinghouses in standard two-sided matching models. They also have implications for the design of decentralised recruitment markets.