Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 201: Hierarchical Assignments: Stability and Fairness

Kimmo Eriksson , Johan Karlander and Lars-Erik Öller ()
Additional contact information
Kimmo Eriksson: Department of Mathematics, Postal: Royal Institute of Technology, S-100 44 Stockholm, Sweden
Johan Karlander: Department of Mathematics, Postal: Royal Institute of Technology, S-100 44 Stockholm, Sweden
Lars-Erik Öller: Dept. of Economic Statistics, Stockholm School of Economics, Postal: Box 6501, S-113 83 Stockholm, Sweden

Abstract: We study a simple model of the job market, where workers are assigned to employers. We specify conditions under which the market is hierarchical in a natural sense. For such hierarchies, we can state explicit values for the earnings in the worker-optimal and employer-optimal solutions. This is a discrete analogue to the Ricardian differential rent model of Sattinger (1979). We discuss the compatibility problems between fairness and stability of earnings and assignments and argue for a certain solution.

Keywords: Hierarchies; assignment; fairness; envy

JEL-codes: C78

15 pages, October 27, 1997

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