Hedonic price equilibria, stable matching, and optimal transport: equivalence, topology, and uniqueness
AbstractHedonic pricing with quasilinear preferences is shown to be equivalent to stable matching with transferable utilities and a participation constraint, and to an optimal transportation (Monge-Kantorovich) linear programming problem. Optimal assignments in the latter correspond to stable matchings, and to hedonic equilibria. These assignments are shown to exist in great generality; their marginal indirect payoffs with respect to agent type are shown to be unique whenever direct payoffs vary smoothly with type. Under a generalized Spence-Mirrlees condition the assignments are shown to be unique and to be pure, meaning the matching is one-to-one outside a negligible set. For smooth problems set on compact, connected type spaces such as the circle, there is a topological obstruction to purity, but we give a weaker condition still guaranteeing uniqueness of the stable match. An appendix resolves an old problem (# 111) of Birkhoff in probability and statistics , by giving a necessary and sufficient condition on the support of a joint probability to guarantee extremality among all joint measures with the same marginals.
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Bibliographic InfoArticle provided by Springer in its journal Economic Theory.
Volume (Year): 42 (2010)
Issue (Month): 2 (February)
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Other versions of this item:
- Pierre-Andre Chiappori & Robert McCann & Lars Nesheim, 2007. "Hedonic price equilibria, stable matching, and optimal transport: equivalence, topology, and uniqueness," CeMMAP working papers CWP23/07, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
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