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THE ASSIGNMENT GAME WITH NEGATIVE EXTERNALITIES AND BOUNDED RATIONALITY

Kimmo Eriksson, Fredrik Jansson () and Thomas Vetander
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Fredrik Jansson: Centre for the Study of Cultural Evolution, Stockholm University, SE-106 91 Stockholm, Sweden;
Thomas Vetander: Centre for the Study of Cultural Evolution, Stockholm University, SE-106 91 Stockholm, Sweden;

International Game Theory Review (IGTR), 2011, vol. 13, issue 04, 443-459

Abstract: We introduce negative externalities in the form of ill will among the players of the classic two-sided assignment game of Shapley and Shubik, by letting each player's utility be negatively correlated with the payoff of all the players in his group. The new game is very complex, but under a certain assumption of bounded rationality we derive a straightforward notion of stable outcomes as certain conjectural equilibria. We prove that several well-known properties of the set of stable outcomes in the assignment game carry over to this new game.

Keywords: Two-sided matching; stable outcome; bounded rationality; assignment game; social preferences; negative externalities; C71; C78; D62 (search for similar items in EconPapers)
JEL-codes: B4 C0 C6 C7 D5 D7 M2 (search for similar items in EconPapers)
Date: 2011
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DOI: 10.1142/S0219198911003088

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