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Directed matching with endogenous Markov probability: clients or competitors?
Author(s) -
Ciapanna Emanuela
Publication year - 2011
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/j.1756-2171.2010.00127.x
Subject(s) - competitor analysis , markov perfect equilibrium , matching (statistics) , business , externality , consumption (sociology) , microeconomics , quality (philosophy) , marketing , poaching , industrial organization , economics , nash equilibrium , social science , philosophy , statistics , population , demography , mathematics , epistemology , sociology
This article analyzes the practice of opportunistic poaching of consultants by clients, with particular reference to the business consulting industry. The strategic interaction of consulting groups, client firms, and consultants gives rise to a market equilibrium in a mixed economy. Under very general conditions, whenever a match client‐consultant is formed, a pure strategy equilibrium exists where the consulting group pleases the client's request and the consultant is poached by the client. Thus, the equilibrium quality of the consulting services market does not depend only on the consulting group's assignment strategy but also on the clients' poaching behavior (consumption externality).