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Stochastic Sorting

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  • Hector Chade

    (arizona state university)

Abstract

We develop a general model of matching market under uncertainty. In the model, agents' payoff-relevant characteristics are realized after matching takes place, and matches are formed based on ex-ante attributes that are noisy signals of the true characteristics. We derive conditions under which there is positive or negative assortative matching, and determine the properties of the distributions of ex-post attributes of matched partners. The conditions for sorting relate properties of the match payoff function with the stochastic order imposed on the conditional distributions of the agents' characteristics given their ex-ante attributes. We analyze both the transferable utility case and a class of risk sharing problems with nontransferable utility. Finally, we provide conditions under which the properties of the match payoff function and its degree of complementarity can be identified from observed match data.

Suggested Citation

  • Hector Chade, 2013. "Stochastic Sorting," 2013 Meeting Papers 1222, Society for Economic Dynamics.
    • Handle: RePEc:red:sed013:1222
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    References listed on IDEAS

    as
    1. Patrick Legros & Andrew F. Newman, 2007. "Beauty Is a Beast, Frog Is a Prince: Assortative Matching with Nontransferabilities," Econometrica, Econometric Society, vol. 75(4), pages 1073-1102, July.
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    4. Robert Shimer & Lones Smith, 2000. "Assortative Matching and Search," Econometrica, Econometric Society, vol. 68(2), pages 343-370, March.
    5. Daniel A. Ackerberg & Maristella Botticini, 2002. "Endogenous Matching and the Empirical Determinants of Contract Form," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 564-591, June.
    6. Alfred Galichon & Bernard Salanié, 2010. "Matching with Trade-offs: Revealed Preferences over Competiting Characteristics," Working Papers hal-00473173, HAL.
    7. Karlin, Samuel & Rinott, Yosef, 1980. "Classes of orderings of measures and related correlation inequalities. I. Multivariate totally positive distributions," Journal of Multivariate Analysis, Elsevier, vol. 10(4), pages 467-498, December.
    8. Chade, Hector, 2006. "Matching with noise and the acceptance curse," Journal of Economic Theory, Elsevier, vol. 129(1), pages 81-113, July.
    9. Schulhofer-Wohl, Sam, 2006. "Negative assortative matching of risk-averse agents with transferable expected utility," Economics Letters, Elsevier, vol. 92(3), pages 383-388, September.
    10. Eugene Choo & Aloysius Siow, 2006. "Who Marries Whom and Why," Journal of Political Economy, University of Chicago Press, vol. 114(1), pages 175-201, February.
    Full references (including those not matched with items on IDEAS)

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