Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/235605 
Year of Publication: 
2021
Series/Report no.: 
Working Paper No. 392
Publisher: 
University of Zurich, Department of Economics, Zurich
Abstract: 
We incorporate externalities into the stable matching theory of two-sided markets. Extending the classical substitutes condition to markets with externalities, we establish that stable matchings exist when agent choices satisfy substitutability. We show that substitutability is a necessary condition for the existence of a stable matching in a maximal-domain sense and provide a characterization of substitutable choice functions. In addition, we extend the standard insights of matching theory, like the existence of side-optimal stable matchings and the deferred acceptance algorithm, to settings with externalities even though the standard fixed-point techniques do not apply.
Subjects: 
Matching
externalities
two-sided matching
matching with contracts
stable matching
labor markets
deferred acceptance
substitutes
JEL: 
C78
D47
D50
D62
D86
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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