This paper studies rigidities in sharing joint payoffs (non-transferability) as a source of excessive segregation in labor or education markets. The resulting distortions in ex-ante investments, such as education acquisition, link such mismatches to the possibility of simultaneous...

Does a competitive equilibrium in a matching market provide adequate incentives for investments made before the market when utility is not perfectly transferable? This paper derives a necessary and sufficient condition for equilibrium investments to maximize surplus conditional on the matching...