Stability in matching markets with peer effects

Journal Article (Journal Article)

The paper investigates conditions which guarantee the existence of a stable outcome in a school matching in the presence of peer effects. We consider an economy where students are characterized by their type and schools are characterized by their quality and capacity. We divide students and schools into groups, so that going to a school outside of one's group is associated with additional costs or prohibited. A student receives utility from a school per se and from one's classmates. We find that sufficient condition for a stable matching to exist is that a directed graph, which governs the possibility to go from one group to another, should not have (undirected) cycles. We construct a polynomial time algorithm, which produces a stable matching. Furthermore, we show that if the graph has a cycle, then there exist other economy parameters (types, costs and so on), so that no stable matching exists.

Full Text

Duke Authors

Cited Authors

  • Bykhovskaya, A

Published Date

  • July 1, 2020

Published In

Volume / Issue

  • 122 /

Start / End Page

  • 28 - 54

Electronic International Standard Serial Number (EISSN)

  • 1090-2473

International Standard Serial Number (ISSN)

  • 0899-8256

Digital Object Identifier (DOI)

  • 10.1016/j.geb.2020.03.010

Citation Source

  • Scopus