Incentive-Compatible Matching Mechanisms: Consistency with Various Stability Notions
22 Pages Posted: 18 May 2011 Last revised: 9 Jun 2012
Date Written: May 17, 2011
I study the consistency of incentive compatibility with several stability notions for a one-to-one matching market with transfers. Ex post stability, studied in the matching literature, is too strong to be satisfied together with incentive compatibility. Therefore, I introduce weaker stability notions: ex ante stability and interim stability. Although ex ante stability is consistent with incentive compatibility when agents are ex ante identical or when the market is balanced, interim stability can only be satisfied when there is one agent on the short side of the market, as in auctions. Which stability is appropriate depends on when agents can block.
Keywords: Matching, incomplete information, stability, incentive compatibility, auctions, multidimensional types
JEL Classification: C72, C78, D82
Suggested Citation: Suggested Citation