A Theory of Stability in Matching with Incomplete Information

52 Pages Posted: 30 May 2019 Last revised: 2 Nov 2020

See all articles by Yi-Chun Chen

Yi-Chun Chen

National University of Singapore (NUS) - Department of Economics

Gaoji Hu

Shanghai University of Finance and Economics - School of Economics

Date Written: November 23, 2018

Abstract

We provide a framework for studying two-sided matching markets with incomplete information. The framework accommodates two-sided incomplete information as well as heterogeneous information among the agents. We propose a notion called stability for a market state, which, based upon agents' information structure, requires (i) individual rationality, (ii) no blocking and (iii) information stability. The novelty of our stability notion lies in how the agents evaluate a blocking prospect, in the presence of general two-sided incomplete information. We show that a stable state exists; moreover, if a state is stable, then coarsening agents' information leads to another stable state.

Keywords: two-sided matching, incomplete information, blocking, stability

JEL Classification: C78, D83

Suggested Citation

Chen, Yi-Chun and Hu, Gaoji, A Theory of Stability in Matching with Incomplete Information (November 23, 2018). Available at SSRN: https://ssrn.com/abstract=3384439 or http://dx.doi.org/10.2139/ssrn.3384439

Yi-Chun Chen

National University of Singapore (NUS) - Department of Economics ( email )

1 Arts Link AS2 #06-02
Singapore 117570, Singapore 119077
Singapore

Gaoji Hu (Contact Author)

Shanghai University of Finance and Economics - School of Economics ( email )

777 Guoding Road
Shanghai, 200433
China

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