Two-sided matching provides a model of search processes such as those between firms and workers in labor markets or between buyers and sellers in auctions. This book gives a comprehensive account of recent results concerning the game-theoretic analysis of two-sided matching. The focus of the book is on the stability of outcomes, on the incentives that different rules of organization give to agents, and on the constraints that these incentives impose on the ways such markets can be organized. The results for this wide range of related models and matching situations help clarify which conclusions depend on particular modeling assumptions and market conditions, and which are robust over a wide range of conditions.

Two-Sided Matching

Bargaining in a network of buyers and sellers

In this paper, we describe a series of laboratory experiments that implement specific examples of a general network structure. Specifically, actions are either strategic substitutes or strategic complements, and participants have either complete or incomplete information about the structure of a random network. Since economic environments typically have a considerable degree of complementarity or substitutability, this framework applies to a wide variety of settings. We examine behavior and equilibrium selection. The degree of equilibrium play is striking, in particular with incomplete information. Behavior closely resembles the theoretical equilibrium whenever this is unique; when there are multiple equilibria, general features of networks, such as connectivity, clustering, and the degree of the players, help to predict informed behavior in the lab. People appear to be strongly attracted to maximizing aggregate payoffs (social efficiency), but there are forces that moderate this attraction: (1) people seem content with (in the aggregate) capturing only the lion's share of the efficient profits in exchange for reduced exposure to loss, and (2) uncertainty about the network structure makes it considerably more difficult to coordinate on a demanding, but efficient, equilibrium that is typically implemented with complete information.

/pdf/experimental-games-on-networks-underpinnings-of-behavior-and-2jdp3att4m.pdf

Experimental Games on Networks: Underpinnings of Behavior and Equilibrium Selection

https://escholarship.org/content/qt7v98682v/qt7v98682v.pdf?t=lnoo9t

Bargaining and Network Structure: An Experiment

Publisher Summary This chapter discusses the games that are two-sided matching markets. The phrase two-sided refers to the fact that agents in such markets belong, from the outset, to one of two disjoint sets-e.g, firms or workers. The term matching refers to the bilateral nature of exchange in these markets. The game-theoretic analysis of these markets has proved useful in various empirically oriented studies. This chapter describes some of the phenomena the theory should be able to explain, and concludes by returning to consider how the theory addresses the empirical questions raised at the beginning. The chapter focuses on both the core of the game and the dominant and equilibrium strategies under various rules about how the game might be played. The distinction between cooperative and noncooperative game theory is often somewhat artificial because the tools of both kinds of theory can be used to study the same phenomena.

Sharon C Rochford

Papers

Bargaining and Competition in Matching Markets