Long‐Term Partnership Formation: Marriage and Employment

Of course, marriage and employment are different. Nevertheless, a worker looking for a job, a ®rm looking for worker, or a single person looking for a marriage partner face similar problems as all are seeking a long-term partner. Indeed, forming long-term partnerships is a common occurrence in life. There are many other examples ± business people search for other business people to form a pro®table relationship, bridge players seek to ®nd a suitable partners, students search for a good university, we would all like to ®nd a good friend, etc. The problem becomes signi®cant if there are substantial differences in the return obtained from forming a partnership with different partners. For example, employers differ in the wages they offer, or in the work environment they provide. In such a situation a worker may reject some job offers. Similarly, as many have learned to their cost, some make better marriage partners than others. The problem is two-sided. While a worker is evaluating a potential employer, the employer is also evaluating the worker. It is this two-sided aspect of the problem that generates a signi®cant interest. A worker's willingness to accept employment at a ®rm depends not only on the characteristics of the ®rm but also the other possible options open to the worker. The better an individual's opportunities elsewhere, the more selective he or she will be in evaluating a potential partnership. An academic who believes Harvard may make an offer in the near future, will be more selective in evaluating offers from lesser universities. In this way expectations play a role. If a single man believes that few, if any, women will ®nd him an acceptable marriage partner, then he may accept the ®rst opportunity that presents itself. Partnership formation, typically, does not comply with a classic market situation, where all participants know everything and all trades take place at zero cost. Finding a job, ®nding a husband or wife, or ®nding a business partner is a time consuming activity where opportunities typically arrive over time at uncertain intervals of time. Of course, we can act in ways that in uence the arrival rate of potential partner. Workers go to employment agencies, or read help wanted advertisements in newspapers, singles of a certain age go to discos, or join tennis clubs. The literature on search and matching (SM) (see Mortensen (1982), and Pissarides (1990) for early examples)1 provides an excellent framework for The Economic Journal, 109 ( June), F307±F334. # Royal Economic Society 1999. Published by Blackwell Publishers, 108 Cowley Road, Oxford OX4 1JF, UK and 350 Main Street, Malden, MA 02148, USA.