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This paper studies the assignment of heterogeneous workers to heterogeneous jobs. Owing to the anonymity of a large labor market, workers use mixed strategies when applying for jobs. This randomness generates coordination frictions. Two workers may apply for a particular job, whereas an identical job gets no applications. The model generates assortative matching, with a positive but imperfect correlation between matched workers' and firms' types. It predicts that a worker's wage is increasing in her job's productivity and a firm's profit is increasing in its employees' productivity. The model also yields a version of the welfare theorems.

We study a model of over-the-counter trading in which ex ante identical traders invest in a contact technology and participate in bilateral trade. We show that a rich market structure emerges both in equilibrium and in an optimal allocation. There is continuous heterogeneity in market access under weak regularity conditions. If the cost per contact is constant, heterogeneity is governed by a power law and there are middlemen, market participants with unboundedly high contact rates who account for a positive fraction of meetings. Externalities lead to overinvestment in equilibrium, and policies that reduce investment in the contact technology can improve welfare. We relate our findings to important features of real-world trading networks. [ABSTRACT FROM AUTHOR]

Why are workers unemployed sometimes? Why do unemployed workers coexist with job vacancies? How much does the incidence and the duration of unemployment rise during economic downturns, and why? Much [...]