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Stable Marriages and Search Frictions

Listed author(s):
  • Stephan Lauermann
  • Georg Nöldeke

    ()

    (University of Basel)

We embed a two-sided matching market with non-transferable utility, a marriage market, into a random search model. We study steadystate equilibria and characterize the limit of the corresponding equilibrium matchings as exogenous search frictions become small. The central question is whether the set of such limit matchings coincides with the set of stable matchings for the underlying marriage market. We show that this is the case if and only if there is a unique stable matching. Otherwise, the set of limit matchings contains the set of all stable deterministic matchings, but also contains unstable random matchings. These unstable random matchings are Pareto dominated. Thus, vanishing frictions do not guarantee the eciency of decentralized marriage markets.

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Paper provided by Faculty of Business and Economics - University of Basel in its series Working papers with number 2012/10.

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Date of creation: 2012
Handle: RePEc:bsl:wpaper:2012/10
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