Matching with Strategic Consistency
43 Pages Posted: 6 Jul 2017 Last revised: 12 Dec 2023
Date Written: December 11, 2023
Abstract
In many environments, agents form agreements that have externalities or are multilateral, and may view some agreements as substitutable and others as complementary. This paper presents an approach that accommodates arbitrary externalities, preferences, and market structures in matching models. It does so by endogenizing the agents’ choice functions while employing the standard stability concept. Instead of assuming that each agent chooses their favorite set of contracts, we require agents to choose optimally given correct beliefs about the choices of others. We show how our results facilitate new comparative statics about stable outcomes and allow the use of matching-theoretic stability in new applications.
Keywords: Externalities, multilateral matching, matching with contracts, stability
JEL Classification: C78, D47, D85
Suggested Citation: Suggested Citation