Matching With Complementary Contracts
Econometrica · 2020 · Volume 88 · Issue 5
Abstract
In this paper, we show that stable outcomes exist in matching environments with complementarities, such as social media platforms or markets for patent licenses. Our results apply to both nontransferable and transferable utility settings, and allow for multilateral agreements and those with externalities. In particular, we show that stable outcomes in these settings are characterized by the largest fixed point of a monotone operator, and so can be found using an algorithm; in the nontransferable utility case, this is aone-sideddeferred acceptance algorithm, rather than a Gale–Shapley algorithm. We also give a monotone comparative statics result as well as a comparative static on the effect of bundling contracts together. These illustrate the impact of design decisions, such as increased privacy protections on social media, or the use of antitrust law to disallow patent pools, on stable outcomes.
Keywords
Complementarities, matching with contracts, stability, contract design
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