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Matching in Networks with Bilateral Contracts

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  • John William Hatfield
  • Scott Duke Kominers

Abstract

We introduce a model in which firms trade goods via bilateral contracts which specify a buyer, a seller, and the terms of the exchange. This setting subsumes (many-to-many) matching with contracts, as well as supply chain matching. When firms' relationships do not exhibit a supply chain structure, stable allocations need not exist. By contrast, in the presence of supply chain structure, a natural substitutability condition characterizes the maximal domain of firm preferences for which stable allocations are guaranteed to exist. Furthermore, the classical lattice structure, rural hospitals theorem, and one-sided strategy-proofness results all generalize to this setting. (JEL C78, D85, D86, L14)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Microeconomics.

Volume (Year): 4 (2012)
Issue (Month): 1 (February)
Pages: 176-208

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Handle: RePEc:aea:aejmic:v:4:y:2012:i:1:p:176-208

Note: DOI: 10.1257/mic.4.1.176
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References

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  1. Alvin Roth, 2008. "Deferred acceptance algorithms: history, theory, practice, and open questions," International Journal of Game Theory, Springer, vol. 36(3), pages 537-569, March.
  2. John William Hatfield & Scott Duke Kominers & Alexandru Nichifor & Michael Ostrovsky & Alexander Westkamp, 2013. "Stability and Competitive Equilibrium in Trading Networks," Journal of Political Economy, University of Chicago Press, vol. 121(5), pages 966 - 1005.
  3. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, September.
  4. Roth, Alvin E, 1984. "Stability and Polarization of Interests in Job Matching," Econometrica, Econometric Society, vol. 52(1), pages 47-57, January.
  5. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521536721.
  6. Westkamp, Alexander, 2010. "Market structure and matching with contracts," Journal of Economic Theory, Elsevier, vol. 145(5), pages 1724-1738, September.
  7. John William Hatfield & Fuhito Kojima, 2008. "Matching with Contracts: Comment," American Economic Review, American Economic Association, vol. 98(3), pages 1189-94, June.
  8. Crawford, Vincent P & Knoer, Elsie Marie, 1981. "Job Matching with Heterogeneous Firms and Workers," Econometrica, Econometric Society, vol. 49(2), pages 437-50, March.
  9. Alkan, Ahmet & Gale, David, 2003. "Stable schedule matching under revealed preference," Journal of Economic Theory, Elsevier, vol. 112(2), pages 289-306, October.
  10. Sotomayor, Marilda, 2004. "Implementation in the many-to-many matching market," Games and Economic Behavior, Elsevier, vol. 46(1), pages 199-212, January.
  11. Kojima, Fuhito, 2008. "The law of aggregate demand and welfare in the two-sided matching market," Economics Letters, Elsevier, vol. 99(3), pages 581-584, June.
  12. Roth, Alvin E., 1985. "The college admissions problem is not equivalent to the marriage problem," Journal of Economic Theory, Elsevier, vol. 36(2), pages 277-288, August.
  13. Hatfield, John William & Kojima, Fuhito, 2010. "Substitutes and stability for matching with contracts," Journal of Economic Theory, Elsevier, vol. 145(5), pages 1704-1723, September.
  14. Alexander Westkamp, 2010. "Market Structure and Matching with Contracts," Bonn Econ Discussion Papers bgse02_2010, University of Bonn, Germany.
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Citations

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Cited by:
  1. Hatfield, John William & Immorlica, Nicole & Kominers, Scott Duke, 2012. "Testing substitutability," Games and Economic Behavior, Elsevier, vol. 75(2), pages 639-645.
  2. Bernard SalaniƩ & Alfred Galichon, 2011. "Cupid's Invisible Hand: Social Surplus and Identification in Matching Models," Discussion Papers 1011-03, Columbia University, Department of Economics.
  3. Kominers, Scott Duke, 2012. "On the correspondence of contracts to salaries in (many-to-many) matching," Games and Economic Behavior, Elsevier, vol. 75(2), pages 984-989.
  4. Hatfield, John William & Kominers, Scott Duke, 2013. "Vacancies in supply chain networks," Economics Letters, Elsevier, vol. 119(3), pages 354-357.

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