The Evolution of Core Stability in Decentralized Matching Markets

25 Pages Posted: 7 Jun 2013

See all articles by Heinrich H. Nax

Heinrich H. Nax

ETH Zürich; University of Zurich

Bary Pradelski

CNRS, Université Grenoble Alpes

H. Peyton Young

Brookings Institution

Date Written: June 5, 2013

Abstract

Decentralized matching markets on the internet allow large numbers of agents to interact anonymously at virtually no cost. Very little information is available to market participants and trade takes place at many different prices simultaneously. We propose a decentralized, completely uncoupled learning process in such environments that leads to stable and efficient outcomes. Agents on each side of the market make bids for potential partners and are matched if their bids are mutually profitable. Matched agents occasionally experiment with higher bids if on the buy-side (or lower bids if on the sell-side), while single agents, in the hope of attracting partners, lower their bids if on the buy-side (or raise their bids if on the sell-side). This simple and intuitive learning process implements core allocations even though agents have no knowledge of other agents' strategies, payoffs, or the structure of the game, and there is no central authority with such knowledge either.

Keywords: Assignment Games, Cooperative Games, Core, Evolutionary Game Theory, Learning, Matching Markets

JEL Classification: C71, C73, C78, D83

Suggested Citation

Nax, Heinrich H. and Pradelski, Bary and Young, H. Peyton, The Evolution of Core Stability in Decentralized Matching Markets (June 5, 2013). FEEM Working Paper No. 50.2013. Available at SSRN: https://ssrn.com/abstract=2274753 or http://dx.doi.org/10.2139/ssrn.2274753

Heinrich H. Nax

ETH Zürich ( email )

Rämistrasse 101
ZUE F7
Zürich, 8092
Switzerland

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

Bary Pradelski (Contact Author)

CNRS, Université Grenoble Alpes ( email )

Grenoble
France

HOME PAGE: http://cnrs.fr

H. Peyton Young

Brookings Institution ( email )

1775 Massachusetts Ave. NW
Washington, DC 20036-2188
United States

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