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Assignment Games with Externalities

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Author Info

  • Gudmundsson, Jens

    ()
    (Department of Economics, Lund University)

  • Habis, Helga

    ()
    (Department of Economics, Lund University)

Abstract

We introduce externalities into a two-sided, one-to-one assignment game by letting the values generated by pairs depend on the behavior of the other agents. Extending the notion of blocking to this setup is not straightforward; a pair has to take into account the possible reaction of the residual agents to be able to assess the value it could achieve. We define blocking in a rather general way that allows for many behavioral considerations or beliefs. The main result of the paper is that a stable outcome in an assignment game with externalities always exists if and only if all pairs are pessimistic regarding the others' reaction following a deviation. The relationship of stability and optimality is also discussed, as is the structure of the set of stable outcomes.

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File URL: http://project.nek.lu.se/publications/workpap/papers/WP13_27.pdf
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Bibliographic Info

Paper provided by Lund University, Department of Economics in its series Working Papers with number 2013:27.

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Length: 19 pages
Date of creation: 27 Aug 2013
Date of revision:
Handle: RePEc:hhs:lunewp:2013_027

Contact details of provider:
Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden
Phone: +46 +46 222 0000
Fax: +46 +46 2224613
Web page: http://www.nek.lu.se/en
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Related research

Keywords: Two-sided matching; assignment game; externalities; stability;

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References

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  1. Yukihiko Funaki & Takehiko Yamato, 1999. "The core of an economy with a common pool resource: A partition function form approach," International Journal of Game Theory, Springer, vol. 28(2), pages 157-171.
  2. Sasaki, Hiroo & Toda, Manabu, 1996. "Two-Sided Matching Problems with Externalities," Journal of Economic Theory, Elsevier, vol. 70(1), pages 93-108, July.
  3. Ismail Saglam & Ayse Mumcu, 2007. "The core of a housing market with externalities," Economics Bulletin, AccessEcon, vol. 3(57), pages 1-5.
  4. Kimmo Eriksson & Fredrik Jansson & Thomas Vetander, 2011. "The Assignment Game With Negative Externalities And Bounded Rationality," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 13(04), pages 443-459.
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