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Matching with externalities


Pycia, Marek; Yenmez, M Bumin (2023). Matching with externalities. Review of Economic Studies, 90(2):948-974.

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.

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.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:Economics and econometrics, matching with externalities, deferred acceptance algorithm, substitutability, labour markets with couples
Scope:Discipline-based scholarship (basic research)
Language:English
Date:6 March 2023
Deposited On:09 Feb 2023 08:27
Last Modified:28 Apr 2024 01:49
Publisher:Oxford University Press
ISSN:0034-6527
Additional Information:Earlier published as ECON Working Paper No. 392: https://www.zora.uzh.ch/id/eprint/204367/
OA Status:Hybrid
Publisher DOI:https://doi.org/10.1093/restud/rdac032
Related URLs:https://www.zora.uzh.ch/152254
https://www.zora.uzh.ch/204367
Other Identification Number:merlin-id:23320
  • Content: Published Version
  • Language: English
  • Licence: Creative Commons: Attribution 4.0 International (CC BY 4.0)