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A Theory of Stability in Matching with Incomplete Information

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  • Yi-Chun Chen
  • Gaoji Hu

Abstract

We provide a framework for studying two-sided matching markets with incomplete information. The framework accommodates two-sided incomplete information as well as heterogeneous information among the agents. We propose a notion called stability for a market state, which, based upon agents' information structure, requires (i) individual rationality, (ii) no blocking, and (iii) information stability. The novelty of our stability notion lies in how the agents evaluate a blocking prospect in the presence of general two-sided incomplete information. We show that a stable state exists; moreover, if a state is stable, then coarsening agents' information leads to another stable state.

Suggested Citation

  • Yi-Chun Chen & Gaoji Hu, 2023. "A Theory of Stability in Matching with Incomplete Information," American Economic Journal: Microeconomics, American Economic Association, vol. 15(1), pages 288-322, February.
    • Handle: RePEc:aea:aejmic:v:15:y:2023:i:1:p:288-322
    DOI: 10.1257/mic.20200411
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    Citations

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    Cited by:

    1. Chen, Yi-Chun & Hu, Gaoji, 2024. "Bayesian stable states," Games and Economic Behavior, Elsevier, vol. 145(C), pages 102-116.
    2. Kenny Peng & Nikhil Garg, 2024. "Wisdom and Foolishness of Noisy Matching Markets," Papers 2402.16771, arXiv.org.

    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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