Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/282080 
Year of Publication: 
2023
Series/Report no.: 
Discussion Paper No. 388
Publisher: 
Ludwig-Maximilians-Universität München und Humboldt-Universität zu Berlin, Collaborative Research Center Transregio 190 - Rationality and Competition, München und Berlin
Abstract: 
Agents with reciprocal preferences prefer to be matched to a partner who also likes to collaborate with them. In this paper, we introduce and formalize reciprocal preferences, apply them to matching markets, and analyze the implications for mechanism design. Formally, the preferences of an agent can depend on the preferences of potential partners and there is incomplete information about the partners' preferences. We find that there is no stable mechanism in standard two-sided markets. Observing the final allocation of the mechanism enables agents to learn about each other's preferences, leading to instability. However, in a school choice setting with one side of the market being non-strategic, modified versions of the deferred acceptance mechanism can achieve stability. These results provide insights into non-standard preferences in matching markets, and their implications for efficient information and mechanism design.
Subjects: 
market design
matching
reciprocal preferences
non-standard preferences
gale-shapley deferred acceptance mechanism
incomplete information
JEL: 
C78
D47
D82
D83
D91
Document Type: 
Working Paper

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