Stability in Large Markets

Ravi Jagadeesan and Karolina Vocke

The Review of Economic Studies, 2024, vol. 91, issue 6, 3532-3568

Abstract: In matching models, pairwise-stable outcomes do not generally exist without substantial restrictions on both preferences and the topology of the network of contracts. We address the foundations of matching markets by developing a matching model with a continuum of agents that allows for arbitrary preferences and network structures. We show that pairwise-stable outcomes are guaranteed to exist. When agents can interact with multiple other counterparties, pairwise stability is too weak of a solution concept, and we argue that a refinement of it called tree stability is the most appropriate solution concept in this setting. Our main results show that tree-stable outcomes exist for arbitrary preferences and network topologies.

Keywords: Matching; Large markets; Complementarities; Trading networks; Tree stability (search for similar items in EconPapers)
Date: 2024
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