Matching with externalities

Marek Pycia and M. Bumin Yenmez

No 392, ECON - Working Papers from Department of Economics - University of Zurich

Abstract: We incorporate externalities into the stable matching theory of two-sided markets. Extending the classical substitutes condition to markets with externalities, we establish that stable matchings exist when agent choices satisfy substitutability. We show that substitutability is a necessary condition for the existence of a stable matching in a maximal-domain sense and provide a characterization of substitutable choice functions. In addition, we extend the standard insights of matching theory, like the existence of side-optimal stable matchings and the deferred acceptance algorithm, to settings with externalities even though the standard fixed-point techniques do not apply.

Keywords: Matching; externalities; two-sided matching; matching with contracts; stable matching; labor markets; deferred acceptance; substitutes (search for similar items in EconPapers)
JEL-codes: C78 D47 D50 D62 D86 (search for similar items in EconPapers)
Date: 2021-06
New Economics Papers: this item is included in nep-cta, nep-des, nep-mic and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Matching with Externalities (2023)
Working Paper: Matching with Externalities (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:zur:econwp:392

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