Scandinavian Working Papers in Economics
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Department of Economics, Lund University Working Papers, Department of Economics, Lund University

No 2015:32:
Compromises and Rewards: Stable and Non-manipulable Probabilistic Pairing

Jens Gudmundsson ()

Abstract: Can we reconcile stability with non-manipulability in pairing problems by selecting lotteries over matchings?We examine the problem of eliciting preferences to make pairs as introduced by Gale and Shapley (1962). We develop ex-ante notions of stability and non-manipulability that are parameterized by collections of utility functions. In particular, we study the collection of utility functions with increasing differences for which stability and non-manipulability turn out to characterize Compromises and Rewards. This is a novel rule that is fundamentally different from the one that has attracted most attention in the literature, Deferred Acceptance.

Keywords: Pairing; Lottery; Stability; Non-manipulability; Compromises; Rewards; (follow links to similar papers)

JEL-Codes: C62; D02; D60; (follow links to similar papers)

27 pages, October 26, 2015

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