The organization of the labor market for medical interns and residents underwent a number of changes before taking its present form in 1951. The record of these changes and the problems that prompted them provides an unusual opportunity to study the forces at work in markets of this kind. The present paper begins with a brief history and then presents a game-theoretic analysis to explain the orderly operation and longevity of the current market, in contrast to the turmoil that characterized various earlier short-lived attempts to organize the market. An analysis is also given of some contemporary problems facing the market. A subsidiary theme of the paper concerns the history of ideas: the problems encountered in the organization of this market, and some of the solutions arrived at, anticipated the discussion of such issues in the literature of economics and game theory.

[A model of job-matching is considered, in which the set of employees hired by each firm, and the set of jobs accepted by each worker, are endogenously determined, as are the job descriptions settled on by each worker-firm pair. The set of outcomes that are in equilibrium, in the sense of being stable with respect to recontracting, is shown to be nonempty. It is shown that the interests of the firms and workers are polarized over the set of stable outcomes: There exists a firm-optimal stable outcome that is the best stable outcome for every firm and the worst for every worker, and a corresponding worker-optimal stable outcome that is best for every worker and worst for very firm. These results generalize and extend previous results for models of this type, and raise questions about the nature and underlying causes of such polarization of interests.]

The organization of the labor market for medical interns and residents underwent a number of changes before taking its present form in 1951. The record of these changes and the problems that prompted them provides an unusual opportunity to study the forces at work in markets of this kind. The present paper begins with a brief history and then presents a game-theoretic analysis to explain the orderly operation and longevity of the current market, in contrast to the turmoil that characterized various earlier short-lived attempts to organize the market. An analysis is also given of some contemporary problems facing the market. A subsidiary theme of the paper concerns the history of ideas: the problems encountered in the organization of this market, and some of the solutions arrived at, anticipated the discussion of such issues in the literature of economics and game theory.