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Bundling Incentives in (Many-to-Many) Matching with Contracts

Author

Listed:
  • Jonathan Ma

    (Harvard University)

  • Scott Duke Kominers

    (Harvard Business School, Entrepreneurial Management Unit)

Abstract

In many-to-many matching with contracts, the way in which contracts are specified can affect the set of stable equilibrium outcomes. Consequently, agents may be incentivized to modify the set of contracts upfront. We consider one simple way in which agents may do so: unilateral bundling, in which a single agent links multiple contracts with the same counterparty together. We show that essentially no stable matching mechanism eliminates incentives for unilateral bundling. Moreover, we find that unilateral bundling can sometimes lead to Pareto improvement?and other times produces market power that makes one agent better off at the expense of others.

Suggested Citation

  • Jonathan Ma & Scott Duke Kominers, 2018. "Bundling Incentives in (Many-to-Many) Matching with Contracts," Harvard Business School Working Papers 19-011, Harvard Business School.
    • Handle: RePEc:hbs:wpaper:19-011
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    References listed on IDEAS

    as
    1. 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.
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    More about this item

    Keywords

    Matching with contracts; Contract design; Bundling-proofness; Substitutability;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design

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