Assignment Games with Externalities

Jens Gudmundsson and Helga Habis

No 2013:27, Working Papers from Lund University, Department of Economics

Abstract: We introduce externalities into a two-sided, one-to-one assignment game by letting the values generated by pairs depend on the behavior of the other agents. Extending the notion of blocking to this setup is not straightforward; a pair has to take into account the possible reaction of the residual agents to be able to assess the value it could achieve. We define blocking in a rather general way that allows for many behavioral considerations or beliefs. The main result of the paper is that a stable outcome in an assignment game with externalities always exists if and only if all pairs are pessimistic regarding the others' reaction following a deviation. The relationship of stability and optimality is also discussed, as is the structure of the set of stable outcomes.

Keywords: Two-sided matching; assignment game; externalities; stability (search for similar items in EconPapers)
JEL-codes: C71 C78 D62 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2013-08-27
New Economics Papers: this item is included in nep-gth, nep-mic and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Assignment Games with Externalities (2015)
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