Investment and Competitive Matching
We study markets in which agents ﬁrst make investments and are then matched into potentially productive partnerships. Equilibrium investments and the equilibrium matching will be eﬀicient if agents can simultaneously negotiate investments and matches, but we focus on markets in which agents must ﬁrst sink their investments before matching. Additional equilibria may arise in this sunk-investment setting, even though our matching market is competitive. These equilibria exhibit ineﬀiciencies that we can interpret as coordination failures.