Pairwise Stability in Two Sided Market with Strictly Increasing Valuation Functions

This paper deals with two-sided matching market with two disjoint sets, i.e. the set of buyers and the set of sellers. Each seller can trade with at most with one buyer and vice versa. Money is transferred from sellers to buyers for an indivisible goods that buyers own. Valuation functions, for participants of both sides, are represented by strictly increasing functions with money considered as discrete variable. An algorithm is devised to prove the existence of stability for this model.Comment: 10 pages, no figure

Dynamic matching and bargaining games: A general approach

This paper presents a new characterization result for competitive allocations in quasilinear economies. This result is informed by the analysis of non-cooperative dynamic search and bargaining games. Such games provide models of decentralized markets with trading frictions. A central objective of this literature is to investigate how equilibrium outcomes depend on the level of the frictions. In particular, does the trading outcome become Walrasian when frictions become small? Existing specifications of such games provide divergent answers. The characterization result is used to investigate what causes these differences and to generalize insights from the analysis of specific search and bargaining games.Dynamic Matching and Bargaining, Decentralized Markets, Non-cooperative Foundations of Competitive Equilibrium, Search Theory

The Stability and Efficiency of Economic and Social Networks

This paper studies the formation of networks among individuals. The focus is on the compatibility of overall societal welfare with individual incentives to form and sever links. The paper reviews and synthesizes some previous results on the subject, and also provides new results on the existence of pairwise-stable networks and the relationship between pairwise stable and efficient networks in a variety of contexts and under several definitions of efficiency.networks, network formation, stability, efficiency, social networks

A Survey of Models of Network Formation: Stability and Efficiency

I survey the recent literature on the formation of networks. I provide definitions of network games, a number of examples of models from the literature, and discuss some of what is known about the (in)compatibility of overall societal welfare with individual incentives to form and sever links

Grade Inflation, Social Background, and Labour Market Matching

A model is presented where workers of differing abilities and from different social backgrounds are assigned to jobs based on grades received at school. It is examined how this matching is affected if good grades are granted to some low ability students. Such grade inflation is shown to reduce the aggregate wage of the lower class workers because employers use social origin as a signal for productivity if grades are less than fully informative. Moreover, the high-ability students from the higher class may benefit from grade inflation since this shields them from the competition on the part of able students from the lower classes. --education,grading,standards,assignment,social mobility,grading,standards,assignment,social mobility

The strategy structure of some coalition formation games

In coalitional games with side payments, the core predicts which coalitions form and how benefits are shared. The predictions however run into difficulties if the core is empty or if some coalitions benefit from not blocking truthfully. These difficulties are analyzed in games in which an a priori given collection of coalitions can form, as the collection of pairs of buyer-seller in an assignment game. The incentive properties of the core and of its selections are investigated in function of the collection. Furthermore the relationships with Vickrey-Clarke-Groves mechanisms are drawn.coalition formation ; assignment ; manipulability ; substitutes ; incremental value ; Vickrey-Clarke-Groves mechanism

Stable Matching Games

Gale and Shapley introduced a matching problem between two sets of agents where each agent on one side has an exogenous preference ordering over the agents on the other side. They defined a matching as stable if no unmatched pair can both improve their utility by forming a new pair. They proved, algorithmically, the existence of a stable matching. Shapley and Shubik, Demange and Gale, and many others extended the model by allowing monetary transfers. We offer a further extension by assuming that matched couples obtain their payoff endogenously as the outcome of a strategic game they have to play in a usual non-cooperative sense (without commitment) or in a semi-cooperative way (with commitment, as the outcome of a bilateral binding contract in which each player is responsible for his/her part of the contract). Depending on whether the players can commit or not, we define in each case a solution concept that combines Gale-Shapley pairwise stability with a (generalized) Nash equilibrium stability. In each case, we give the necessary and sufficient conditions for the set of stable allocations to be non-empty, we study its geometry (full/semi-lattice), and provide an algorithm that converges to its maximal element. Finally, we prove that our second model (with commitment) encompasses and refines most of the literature (matching with monetary transfers as well as matching with contracts)

Competing Matchmaking

We study how competing matchmakers use prices to sort participants into search markets, where they form random pairwise matches, and how equilibrium outcomes compare with monopoly in terms of prices, search market structure and sorting efficiency. The role of prices to facilitate sorting is compromised by the need to survive price competition. We show that the competitive outcome can be less efficient in sorting than the monopoly outcome in terms of total match value. In particular, price competition results in a high quality market that is insufficiently exclusive.Overtaking, complementarity, market structure, market coverage, market differentiation

Essays on economic design and coalition formation

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2006.Includes bibliographical references.This thesis consists of three essays on economic design and coalition formation. The first chapter studies the stability of many-to-one matching, such as matching between students and colleges or interns and hospitals. Complementarities and peer effects are inherent in many such matching situations. The chapter provides the first sufficient condition for stability that may be used to study matching with complementarities and peer effects. The condition offered is shown to be also necessary for stability in some matching problems. The second chapter provides a sufficient condition for the non-emptiness of the core in coalition formation such as the formation of clubs, partnerships, firms, business alliances, and jurisdictions voting on public goods. The condition is formulated for settings in which agents first form coalitions and then each coalition realizes a payoff profile from the set of available alternatives via a mechanism. In particular, there exists a core coalition structure if the payoffs are determined in the Tullock rent-seeking game or Nash bargaining. The core might be empty if the payoffs are determined by the Kalai-Smorodinsky or Shapley bargaining solutions.(cont.) The chapter also determines the class of linear sharing rules and regular Pareto-optimal mechanisms for which there are core coalition structures. The third chapter studies the multidimensional screening problem of a profit-maximizing monopolistic seller of goods with multiple indivisible attributes. The buyer's utility is buyer's private information and is linear in the probabilities of obtaining the attributes. The chapter solves the seller's problem for an arbitrary number of attributes when there are two types of buyers, adding a new simple example to the few known examples of solved multidimensional screening problems. When there is a continuum of buyer types, the chapter shows that generically the seller wants to sell goods with some of the attributes partly damaged, stochastic, or leased on restrictive terms. The often-studied simple bundling strategies are shown to be generically suboptimal.by Marek Pycia.Ph.D