Large Matching Markets as Two-Sided Demand Systems

Konrad Menzel

    Research output: Contribution to journalArticlepeer-review

    Abstract

    This paper studies two-sided matching markets with non-transferable utility when the number of market participants grows large. We consider a model in which each agent has a random preference ordering over individual potential matching partners, and agents' types are only partially observed by the econometrician. We show that in a large market, the inclusive value is a sufficient statistic for an agent's endogenous choice set with respect to the probability of being matched to a spouse of a given observable type. Furthermore, while the number of pairwise stable matchings for a typical realization of random utilities grows at a fast rate as the number of market participants increases, the inclusive values resulting from any stable matching converge to a unique deterministic limit. We can therefore characterize the limiting distribution of the matching market as the unique solution to a fixed-point condition on the inclusive values. Finally we analyze identification and estimation of payoff parameters from the asymptotic distribution of observable characteristics at the level of pairs resulting from a stable matching.

    Original languageEnglish (US)
    Pages (from-to)897-941
    Number of pages45
    JournalEconometrica
    Volume83
    Issue number3
    DOIs
    StatePublished - May 1 2015

    Keywords

    • Discrete choice
    • Large games
    • Matching markets
    • Multiple equilibria
    • Pairwise stability

    ASJC Scopus subject areas

    • Economics and Econometrics

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