Bundling Incentives in (Many-to-Many) Matching with Contracts

19 Pages Posted: 14 Aug 2018

Date Written: August 11, 2018

Abstract

In many-to-many matching with contracts, the way in which contracts are specified can affect the set of stable equilibrium outcomes. Consequently, agents may be incentivized to modify the set of contracts upfront. We consider one simple way in which agents may do so: unilateral bundling, in which a single agent links multiple contracts with the same counterparty together. We show that essentially no stable matching mechanism eliminates incentives for unilateral bundling. Moreover, we find that unilateral bundling can sometimes lead to Pareto improvement―and other times produces market power that makes one agent better off at the expense of others.

Keywords: Matching with contracts, Contract design, Bundling-proofness, Substitutability

JEL Classification: C62, C78, D44, D47

Suggested Citation

Ma, Jonathan and Kominers, Scott Duke, Bundling Incentives in (Many-to-Many) Matching with Contracts (August 11, 2018). Harvard Business School Entrepreneurial Management Working Paper No. 19-011. Available at SSRN: https://ssrn.com/abstract=3230353 or http://dx.doi.org/10.2139/ssrn.3230353

Jonathan Ma

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

Scott Duke Kominers (Contact Author)

Harvard University ( email )

Rock Center
Harvard Business School
Boston, MA 02163
United States

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

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