COWLES FOUNDATION FOR RESEARCH IN
ECONOMICS Box 208281
COWLES FOUNDATION DISCUSSION PAPER NO. 1870 Matching with Incomplete Information Quingmin Liu, George J. Mailath, Andrew Postlewaite, and Larry Samuelson August 2012 A large literature uses matching models to analyze markets with
two-sided heterogeneity, studying problems such as the matching of students to schools,
residents to hospitals, husbands to wives, and workers to firms. The analysis typically
assumes that the agents have complete information, and examines core outcomes. We
formulate a notion of stable outcomes in matching problems with one-sided asymmetric
information. The key conceptual problem is to formulate a notion of a blocking pair that
takes account of the inferences that the uninformed agent might make from the hypothesis
that the current allocation is stable. We show that the set of stable outcomes is nonempty
in incomplete information environments, and is a superset of the set of
complete-information stable outcomes. We provide sufficient conditions for
incomplete-information stable matchings to be efficient. |
