Bilateral Matching with Latin Squares

Abstract

We develop a general procedure to construct pairwise meeting processes characterized by two features. First, in each period the process maximizes the number of matches in the population. Second, over time agents meet everybody else exactly once. We call this type of meetings “absolute strangers.” Our methodological contribution to economics is to offer a simple procedure to construct a type of decentralized trading environments usually employed in both theoretical and experimental economics. In particular, we demonstrate how to make use of the mathematics of Latin Squares to enrich the modeling of matching economies.

Keywords: Latin squares, Matching models, Spatial interactions

JEL Classification: C00, C78, D83, E00