Information-Credible Stability in Matching with Incomplete Information

Kaibalyapati Mishra

Papers from arXiv.org

Abstract: In this paper, I develop a refinement of stability for matching markets with incomplete information. I introduce Information-Credible Pairwise Stability (ICPS), a solution concept in which deviating pairs can use credible, costly tests to reveal match-relevant information before deciding whether to block. By leveraging the option value of information, ICPS strictly refines Bayesian stability, rules out fear-driven matchings, and connects belief-based and information-based notions of stability. ICPS collapses to Bayesian stability when testing is uninformative or infeasible and coincides with complete-information stability when testing is perfect and free. I show that any ICPS-blocking deviation strictly increases total expected surplus, ensuring welfare improvement. I also prove that ICPS-stable allocations always exist, promote positive assortative matching, and are unique when the test power is sufficiently strong. The framework extends to settings with non-transferable utility, correlated types, and endogenous or sequential testing.

Date: 2025-10
New Economics Papers: this item is included in nep-des, nep-mic and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2510.22750

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