Journal of Economic Theory, Volume 187, May 2020, 105031
I study sorting in a frictional market where asset owners post their terms, then workers direct their search. When the owners switch from posting prices to the shares of the future output, the competition between workers is handicapped. This leads to inefficient positive assortative matching and distortion of queue lengths, though the Hosios efficiency condition holds for every pair of matched types. All workers pair up with better assets; the best workers suffer while the weakest workers gain. The opposite is true for the asset side.