Experimental and Noncooperative Analyses of Decentralized Matching with Transfers

Abstract

We experimentally and theoretically study decentralized matching markets with transfers of Shapley and Shubik (1972) and Becker (1973). Our contributions are threefold. First, our experiment shows that matching and aggregate surplus achieved are affected by whether efficient matching is assortative and whether the pairwise Nash-Rubinstein bargaining outcome (i.e., an equal split of every efficiently matched pair's surplus) is stable (i.e., in the core), neither of which is predicted to matter in the canonical theory. Second, in markets with equal numbers of participants on the two sides, individual payoffs in our and others' experiments cannot be explained by existing refinements of the core, but are consistent with our noncooperative model's unique prediction, which refines the core. Third and finally, in markets with unequal numbers of participants on the two sides, noncompetitive outcomes--that is, subjects on the long side of the market do not compete fully--are not captured by the canonical theory, but by our noncooperative model a la folk theorems.

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

JEL Classification: C71, C72, C78, C92