Aggregate Stable Matching with Money Burning

Abstract

We propose an alternative notion of non-transferable utility (NTU) stability in matching models that relies on money burning. Our model captures an exchange economy with indivisible goods, fixed prices, and no centralized assignment mechanism. In these models, a non-transferable numeraire (e.g., time) becomes the competitive market-clearing device and enforces the property of equal treatment: two identical individuals will end up with the same equilibrium payoffs. First, we provide a precise connection between our proposed equilibrium concept and the usual NTU stability. Second, by introducing a random utility component, we obtain an NTU counterpart to Choo and Siow's (2006) model. Finally, we provide a dynamic interpretation of the proposed equilibrium concept in a stationary model of market clearing with queues.

Keywords: two-sided matching; non-transferable utility matching; rationing by waiting; non-price rationing; aggregate matching; matching function; disequilibrium; discrete choice; optimal transport

JEL Classification: C78, D58