Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/260084 
Year of Publication: 
2013
Series/Report no.: 
Working Paper No. 2013:27
Publisher: 
Lund University, School of Economics and Management, Department of Economics, Lund
Abstract: 
We introduce externalities into a two-sided, one-to-one assignment game by letting the values generated by pairs depend on the behavior of the other agents. Extending the notion of blocking to this setup is not straightforward; a pair has to take into account the possible reaction of the residual agents to be able to assess the value it could achieve. We define blocking in a rather general way that allows for many behavioral considerations or beliefs. The main result of the paper is that a stable outcome in an assignment game with externalities always exists if and only if all pairs are pessimistic regarding the others' reaction following a deviation. The relationship of stability and optimality is also discussed, as is the structure of the set of stable outcomes.
Subjects: 
Two-sided matching
assignment game
externalities
stability
JEL: 
C71
C78
D62
Document Type: 
Working Paper

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