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Interdependent Utility and Truthtelling in Two-Sided Matching

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  • Xiao Yu Wang
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    Abstract

    Mechanisms which implement stable matchings are often observed to work well in practice, even in environments where the stable outcome is not unique, information is complete, and the number of players is small. Why might individuals refrain from strategic manipulation, even when the complexity cost of manipulation is low? I study a two-sided, one-to-one matching problem with no side transfers, where utility is interdependent in the following intuitive sense: an individual's utility from a match depends not only on her preference ranking of her assigned partner, but also on that partner's ranking of her. I show that, in a world of complete information and linear interdependence, a unique stable matching emerges, and is attained by a modified Gale-Shapley deferred acceptance algorithm. As a result, a stable rule supports truth-telling as an equilibrium strategy. Hence, these results offer a new intuition for why stable matching mechanisms seem to work well in practice, despite their theoretic manipulability: individuals may value being liked.

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    Bibliographic Info

    Paper provided by Duke University, Department of Economics in its series Working Papers with number 13-22.

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    Length: 23
    Date of creation: 2013
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    Handle: RePEc:duk:dukeec:13-22

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    Postal: Department of Economics Duke University 213 Social Sciences Building Box 90097 Durham, NC 27708-0097
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    Web page: http://econ.duke.edu/

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    Keywords: two-sided matching; interdependent utility; stability;

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