Assortative Matching with Externalities and Farsighted Agents

Kenzo Imamura () and Hideo Konishi
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Kenzo Imamura: University of Tokyo Market Design Center

No 1040, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: We consider a one-to-one assortative matching problem in which matched pairs compete for a prize. With such externalities, the standard solution concept, pairwise stable matching, may not exist. In this paper, we consider farsighted agents and analyze the largest consistent set (LCS) of Chwe (1994). Despite the assortative structure of the problem, LCS tend to be large with the standard effectiveness functions: LCS can be the set of all matchings, including an empty matching with no matched pair. By modifying the effectiveness function motivated by Knuth (1976), LCS becomes a singleton of the positive assortative matching. Our results suggest that the choice of effectiveness function can significantly impact the solution in a matching problem with externalities.

Keywords: group contest; pairwise stable matching; assortative matching; farsightedness; largest consistent set; effectiveness function (search for similar items in EconPapers)
JEL-codes: C7 D71 D72 (search for similar items in EconPapers)
Date: 2021-11-04
New Economics Papers: this item is included in nep-des, nep-gth and nep-mic
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Journal Article: Assortative Matching with Externalities and Farsighted Agents (2023)
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