The Revealed Preference Theory of Stable and Extremal Stable Matchings

45 Pages Posted: 15 Nov 2010 Last revised: 14 May 2011

See all articles by Federico Echenique

Federico Echenique

California Institute of Technology - Division of the Humanities and Social Sciences

SangMok Lee

California Institute of Technology - Division of the Humanities and Social Sciences

Matthew Shum

California Institute of Technology

M. Bumin Yenmez

Boston College

Date Written: November 10, 2010

Abstract

We investigate the testable implications of the theory of stable matchings. We provide a characterization of the data that are rationalizable as a stable matching when agents' preferences are unobserved. The characterization is a simple nonparametric test for stability, in the tradition of revealed preference tests. We also characterize the observed stable matchings when monetary transfers are allowed, and the stable matchings that are best for one side of the market (extremal stable matchings). We find that the theory of extremal stable matchings is observationally equivalent to requiring that there be a unique stable matching, or that the matching be consistent with unrestricted monetary transfers. We also present results on rationalizing a matching as the median stable matching.

Keywords: Aggregate matching, stability, rationalizability, revealed preference tests

JEL Classification: C71, C78

Suggested Citation

Echenique, Federico and Lee, SangMok and Shum, Matthew and Yenmez, M. Bumin, The Revealed Preference Theory of Stable and Extremal Stable Matchings (November 10, 2010). Available at SSRN: https://ssrn.com/abstract=1707183 or http://dx.doi.org/10.2139/ssrn.1707183

Federico Echenique

California Institute of Technology - Division of the Humanities and Social Sciences ( email )

313 Baxter Hall
Pasadena, CA 91125
United States

SangMok Lee

California Institute of Technology - Division of the Humanities and Social Sciences ( email )

1200 East California Blvd.
Pasadena, CA 91125
United States

Matthew Shum

California Institute of Technology ( email )

Pasadena, CA 91125
United States

M. Bumin Yenmez (Contact Author)

Boston College ( email )

140 Commonwealth Ave.
Maloney Hall 327
Chestnut Hill, MA 02467
United States

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