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Interdependent Utility and Truthtelling in Two-Sided Matching

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Date
2013-07-18
Author
Wang, XY
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Abstract
Mechanisms which implement stable matchings are often observed to work well in practice, even in environments where the stable outcome is not unique, information is complete, and the number of players is small. Why might individuals refrain from strategic manipulation, even when the complexity cost of manipulation is low? I study a two-sided, one-to-one matching problem with no side transfers, where utility is interdependent in the following intuitive sense: an individual's utility from a match depends not only on her preference ranking of her assigned partner, but also on that partner's ranking of her. I show that, in a world of complete information and linear interdependence, a unique stable matching emerges, and is attained by a modified Gale-Shapley deferred acceptance algorithm. As a result, a stable rule supports truth-telling as an equilibrium strategy. Hence, these results offer a new intuition for why stable matching mechanisms seem to work well in practice, despite their theoretic manipulability: individuals may value being liked.
Type
Journal article
Subject
two-sided matching
interdependent utility
stability
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https://hdl.handle.net/10161/13173
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Scholars@Duke

Wang

Xiao Yu Wang

Adjunct Assistant Professor of Economics
Xiao Yu Wang is an Assistant Professor in the Department of Economics at Duke University. Her major fields of interest are development economics and microeconomic theory. She uses a combination of theoretical and empirical tools to study the equilibrium emergence, evolution, and persistence of organizations and institutional structure, particularly in the unique environments of developing economies. She believes this is important for a better understanding of inequality, and that enrichi

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