This paper studies investment incentives in the steady state of a dynamic bilateral matching market. Because of search … underinvestment on both sides of the market. But when market frictions become negligible, the equilibrium investment levels tend …

distorts investment incentives, while competition mitigates them. The extent of improvement depends critically on demand … decreases the first-period price on the other side. Chapter 2 examines firms’ incentives to invest in local and flexible … between investment and correlation is positive, and if it is costly, the relationship becomes negative; under duopoly, the …