Cupid's Invisible Hand: Social Surplus and Identification in Matching Models

Salanié, Bernard and Alfred Galichon
Authors registered in the RePEc Author Service: Bernard Salanié

No 16228, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We investigate a model of one-to-one matching with transferable utility and general unobserved heterogeneity. Under a separability assumption that generalizes Choo and Siow (2006), we first show that the equilibrium matching maximizes a social gain function that trades off exploiting complementarities in observable characteristics and matching on unobserved characteristics. We use this result to derive simple closed-form formulae that identify the joint matching surplus and the equilibrium utilities of all participants, given any known distribution of unobserved heterogeneity. We provide efficient algorithms to compute the stable matching and to estimate parametric versions of the model. Finally, we revisit Choo and Siow’s empirical application to illustrate the potential of our more general approach.

Keywords: Matching; Marriage; Assignment; Hedonic prices (search for similar items in EconPapers)
JEL-codes: C13 C78 D61 (search for similar items in EconPapers)
Date: 2021-06
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Related works:
Journal Article: Cupid’s Invisible Hand: Social Surplus and Identification in Matching Models (2022)
Working Paper: Cupid’s Invisible Hand: Social Surplus and Identification in Matching Models (2022)
Working Paper: Cupid’s Invisible Hand: Social Surplus and Identification in Matching Models (2022)
Working Paper: Cupid's Invisible Hand: Social Surplus and Identification in Matching Models (2012)
Working Paper: Cupid's Invisible Hand: Social Surplus and Identification in Matching Models (2012)
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