Matching with Externalities

Marek Pycia and M. Bumin Yenmez

No 13994, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We incorporate externalities into the stable matching theory of two-sided markets. Extending the classical substitutes condition to allow for externalities, we establish that stable matchings exist when agent choices satisfy substitutability. Furthermore, we show that substitutability is a necessary condition for the existence of a stable matching in a maximal-domain sense and provide a characterization of substitutable choice functions. In addition, we establish novel comparative statics on externalities and show that the standard insights of matching theory, like the existence of side-optimal stable matchings and the deferred acceptance algorithm, remain valid despite the presence of externalities even though the standard fixed-point techniques do not apply.

JEL-codes: C78 D47 D62 (search for similar items in EconPapers)
Date: 2019-09
New Economics Papers: this item is included in nep-des, nep-ind, nep-mic and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Journal Article: Matching with Externalities (2023)
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