Pairwise Stable Matching in Large Economies

Abstract

We formulate a stability notion for two‐sided pairwise matching problems with individually insignificant agents in distributional form. Matchings are formulated as joint distributions over the characteristics of the populations to be matched. Spaces of characteristics can be high‐dimensional and need not be compact. Stable matchings exist with and without transfers, and stable matchings correspond precisely to limits of stable matchings for finite‐agent models. We can embed existing continuum matching models and stability notions with transferable utility as special cases of our model and stability notion. In contrast to finite‐agent matching models, stable matchings exist under a general class of externalities.