Probabilistic stable rules and Nash equilibrium in two-sided matching problems

Ayşe Yazıcı ()
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Ayşe Yazıcı: Durham University Business School

International Journal of Game Theory, 2017, vol. 46, issue 1, No 6, 103-124

Abstract: Abstract We study many-to-many matching with substitutable and cardinally monotonic preferences. We analyze stochastic dominance (sd) Nash equilibria of the game induced by any probabilistic stable matching rule. We show that a unique match is obtained as the outcome of each sd-Nash equilibrium. Furthermore, individual-rationality with respect to the true preferences is a necessary and sufficient condition for an equilibrium outcome. In the many-to-one framework, the outcome of each equilibrium in which firms behave truthfully is stable for the true preferences. In the many-to-many framework, we identify an equilibrium in which firms behave truthfully and yet the equilibrium outcome is not stable for the true preferences. However, each stable match for the true preferences can be achieved as the outcome of such equilibrium.

Keywords: Probabilistic rules; Stability; Nash equilibrium; Substitutability; Cardinal monotonicity (search for similar items in EconPapers)
JEL-codes: C78 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s00182-015-0525-3

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