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Costly Concessions: An Empirical Framework for Matching with Imperfectly Transferable Utility

61 Pages Posted: 10 Dec 2014 Last revised: 13 Jun 2017

Alfred Galichon

NYU, Department of Economics and Courant Institute

Scott Duke Kominers

Harvard University

Simon Weber

University of Chicago - Becker Friedman Institute for Research in Economics

Date Written: June 12, 2017

Abstract

We introduce an empirical framework for models of matching with imperfectly transferable utility and unobserved heterogeneity in tastes. Our framework allows us to characterize matching equilibrium in a flexible way that includes as special cases the classical fully- and non-transferable utility models, collective models, and settings with taxes on transfers, deadweight losses, or risk aversion. We allow for the introduction of a general class of additive unobserved heterogeneity on agents' preferences. We show existence and uniqueness of an equilibrium under minimal assumptions. We then provide two algorithms to compute the equilibrium in our model. The first algorithm operates under any structure of heterogeneity in preferences; the second is more efficient, but applies only in the case in which random utilities are logit. We show that the log-likelihood of the model has a simple expression and we compute its derivatives. As an empirical illustration, we build a model of marriage with preferences over the partner type and private consumption, which we estimate on a British dataset.

Keywords: Sorting, Matching, Marriage Market, Intrahousehold Allocation, Imperfectly Transferable Utility

JEL Classification: C78, D3, J21, J23, J31, J41

Suggested Citation

Galichon, Alfred and Kominers, Scott Duke and Weber, Simon, Costly Concessions: An Empirical Framework for Matching with Imperfectly Transferable Utility (June 12, 2017). Available at SSRN: https://ssrn.com/abstract=2535394 or http://dx.doi.org/10.2139/ssrn.2535394

Alfred Galichon (Contact Author)

NYU, Department of Economics and Courant Institute ( email )

269 Mercer Street, 7th Floor
New York, NY 10011
United States

Scott Duke Kominers

Harvard University ( email )

Rock Center
Harvard Business School
Boston, MA 02163
United States

HOME PAGE: http://www.scottkom.com/

Simon Weber

University of Chicago - Becker Friedman Institute for Research in Economics ( email )

Chicago, IL 60637
United States

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