Peer Effects and Stability in Matching Markets

Many-to-one matching markets exist in numerous different forms, such as college admissions, matching medical interns to hospitals for residencies, assigning housing to college students, and the classic firms and workers market. In the these markets, externalities such as complementarities and peer effects severely complicate the preference ordering of each agent. Further, research has shown that externalities lead to serious problems for market stability and for developing efficient algorithms to find stable matchings. In this paper we make the observation that peer effects are often the result of underlying social connections, and we explore a formulation of the many-to-one matching market where peer effects are derived from an underlying social network. Our model captures peer effects and complementarities using utility functions rather than traditional preference ordering. With this model and considering pairwise stability, we prove that stable matchings always exist and cha...

• Type: Journal
• Year: 2011
• Where: CORR
• Authors: Elizabeth Bodine-Baron, Christina Lee, Anthony Chong, Babak Hassibi, Adam Wierman
• Keywords: CORR 2011, Education, Many-to-one Matching Market, Markets, Stable Matching