Affiliation:
1. Department of Economics and Risk Management Institute, National University of Singapore (email: )
2. School of Economics and Key Laboratory of Mathematical Economics, Shanghai University of Finance and Economics (email: )
Abstract
We provide a framework for studying two-sided matching markets with incomplete information. The framework accommodates two-sided incomplete information as well as heterogeneous information among the agents. We propose a notion called stability for a market state, which, based upon agents’ information structure, requires (i) individual rationality, (ii) no blocking, and (iii) information stability. The novelty of our stability notion lies in how the agents evaluate a blocking prospect in the presence of general two-sided incomplete information. We show that a stable state exists; moreover, if a state is stable, then coarsening agents’ information leads to another stable state. (JEL C78, D83)
Publisher
American Economic Association
Subject
General Economics, Econometrics and Finance