Decentralized Matching with Transfers: Experimental and Noncooperative Analyses

Abstract

We experimentally examine the Becker-Shapley-Shubik two-sided matching model. In the experiment, the aggregate outcomes of matching and surplus are affected by whether the pairwise Nash-Rubinstein bargaining outcome of equal surplus split is stable and, to a lesser extent, by whether efficient matching is assortative; the canonical cooperative theory predicts no effect. In balanced markets (markets with equal numbers of participants on both sides), individual payoffs in our and others' experiments cannot be explained by existing refinements of the core, but are consistent with the predictions of our noncooperative model. In imbalanced markets (markets with unequal numbers of participants on the two sides), noncompetitive outcomes, in which subjects on the long side do not fully compete, are not captured by the canonical cooperative model, but are included in the set of predictions in our noncooperative model.

Keywords: decentralized matching, matching with transfers, assignment games, bargaining, core

JEL Classification: C71, C72, C78, C92