The Pareto-Stability Concept is a Natural Solution Concept for Discrete Matching Markets with Iindifferences

Marilda Sotomayor

No 2008-12, Working Papers from Brown University, Department of Economics

Abstract: In a decentralized setting the game-theoretical predictions are that only strong blockings are allowed to rupture the structure of a matching. This paper argues that, under indifferences, also weak blockings should be considered when these blockings come from the grand coalition. This solution concept requires stability plus Pareto optimality. A characterization of the set of Pareto-stable matchings for the roommate and the marriage models is provided in terms of individually rational matchings whose blocking pairs, if any, are formed with unmatched agents. These matchings always exist and give an economic intuition on how blocking can be done by non-trading agents, so that the transactions need not be undone as agents reach the set of stable matchings. Some properties of the Pareto-stable matchings shared by the Marriage and Roommate models are obtained.

Keywords: Pareto-optimal; stable matching; Pareto-stable matching; simple matching; Pareto-simple matching (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gth
Date: 2008

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Persistent link: http://EconPapers.repec.org/RePEc:bro:econwp:2008-12

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