Unravelling in Two-Sided Matching Markets and Similarity of Preferences
Games and Economic Behavior 69, no. 2 (2010): 365–393
38 Pages Posted: 16 Oct 2008 Last revised: 4 Jul 2019
Date Written: October 15, 2008
This paper investigates the causes and welfare consequences of unravelling in two-sided matching markets. It shows that similarity of preferences is an important factor driving unravelling. In particular, it shows that under the ex-post stable mechanism (the mechanism that the literature focuses on), unravelling is more likely to occur when participants have more similar preferences. It also shows that any Pareto-optimal mechanism must prevent unravelling, and that the ex-post stable mechanism is Pareto-optimal if and only if it prevents unravelling.
Keywords: two-sided matching, unravelling, similarity of preferences
JEL Classification: C72, C78, D82
Suggested Citation: Suggested Citation