Assignment Games with Externalities
AbstractWe 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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Bibliographic InfoPaper provided by Lund University, Department of Economics in its series Working Papers with number 2013:27.
Length: 19 pages
Date of creation: 27 Aug 2013
Date of revision:
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Two-sided matching; assignment game; externalities; stability;
Find related papers by JEL classification:
- C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D62 - Microeconomics - - Welfare Economics - - - Externalities
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-09-24 (All new papers)
- NEP-GTH-2013-09-24 (Game Theory)
- NEP-MIC-2013-09-24 (Microeconomics)
- NEP-NET-2013-09-24 (Network Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sasaki, Hiroo & Toda, Manabu, 1996. "Two-Sided Matching Problems with Externalities," Journal of Economic Theory, Elsevier, vol. 70(1), pages 93-108, July.
- 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.
- Ismail Saglam & Ayse Mumcu, 2007. "The core of a housing market with externalities," Economics Bulletin, AccessEcon, vol. 3(57), pages 1-5.
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