Stochastic Sorting

Hector Chade

No 1222, 2013 Meeting Papers from Society for Economic Dynamics

Abstract: We develop a general model of matching market under uncertainty. In the model, agents' payoff-relevant characteristics are realized after matching takes place, and matches are formed based on ex-ante attributes that are noisy signals of the true characteristics. We derive conditions under which there is positive or negative assortative matching, and determine the properties of the distributions of ex-post attributes of matched partners. The conditions for sorting relate properties of the match payoff function with the stochastic order imposed on the conditional distributions of the agents' characteristics given their ex-ante attributes. We analyze both the transferable utility case and a class of risk sharing problems with nontransferable utility. Finally, we provide conditions under which the properties of the match payoff function and its degree of complementarity can be identified from observed match data.

Date: 2013
New Economics Papers: this item is included in nep-mic and nep-upt
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