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Efficiency of stable matchings with two-sided incomplete information

Author

Listed:
  • Chen, Yi-Chun

    (Department of Economics and Risk Management Institute, National University of Singapore)

  • Ho, Samuel

    (Department of Economics, Yale University)

Abstract

We uncover an asymmetry in stable matching with two-sided incomplete information: Incomplete-information-stable matching outcomes must be efficient (ex post surplus-maximizing), when the agents’ premuneration values are submodular but not necessarily when their values are supermodular. We show that efficiency of incomplete-information-stable matching hinges on a condition that we call misassignment deduction. The condition requires that for each potential blocking pair of a mismatch, one of the two agents’ worst-case hypotheses contains only type assignments under which their status quo is a mismatch.

Suggested Citation

  • Chen, Yi-Chun & Ho, Samuel, 0. "Efficiency of stable matchings with two-sided incomplete information," Theoretical Economics, Econometric Society.
    • Handle: RePEc:the:publsh:6660
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    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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