We develop a model of matching with contracts which incorporates, as special cases, the college admissions problem, the Kelso-Crawford labor market matching model, and ascending package auctions. We introduce a new “law of aggregate demand” for the case of discrete heterogeneous workers and show that, when workers are substitutes, this law is satisfied by profit-maximizing firms. When workers a...

A random assignment is ordinally efficient if it is not stochastically dominated with respect to individual preferences over sure objects. Ordinal efficiency implies (is implied by) ex post (ex ante) efficiency. A simple algorithm characterizes ordinally efficient assignments: our solution, probabilistic serial (PS), is a central element within their set. Random priority (RP) orders agents from...

This paper uses a mechanism design framework to characterize how an intermediary can design profit-maximizing matching markets when agents have private information about their quality. When match surpluses are supermodular, sufficient conditions are provided that ensure positive assortative matching is profit maximizing. Under these conditions, two-sided position auctions are characterized that...

We extend the ‘no-haggling’ result of Riley and Zeckhauser (1983) to the class of linear multiproduct monopoly problems when the buyer’s valuations are smoothly distributed. In particular we show that there is no loss for the seller in optimizing over mechanisms such that all allocations belong to the boundary of the feasible set. The set of potentially optimal mechanisms can be further restric...

We experimentally investigate the Jackson and Moselle (2002) model where legislators bargain over policy proposals and the allocation of private goods. Key comparative static predictions of the model hold with the introduction of private goods, including “strange bedfellow” coalitions. Private goods help to secure legislative compromise and increase the likelihood of proposals passing, an outco...

We study coalition formation processes of Konishi and Ray (2003) [27]. It is shown that an absorbing and deterministic process of coalition formation that also forms an equilibrium – satisfies a coalitional one-deviation property – does exist if one allows the process to be history dependent. All such dynamic equilibrium processes of coalition formation are characterized. Absorbing outcomes of ...

Adaptive learning and a fairness motive we call ‘‘punishment’’ are the basis for two prominent and substantially different types of theories of ultimatum bargaining behavior. We compare adaptive learning and fairness in an experiment that involves punishment and reward versions of the ultimatum game. We draw conclusions concerning the abilities and limitations of both types of theories. The res...

To encourage diversity, branches may vary contracts’ priorities across slots. The agents who match to branches, however, have preferences only over match partners and contractual terms. Ad hoc approaches to resolving agents’ indifferences across slots in the Chicago and Boston school choice programs have introduced biases, which can be corrected with more careful market design. Slot-specific pr...

In this paper, we present a non-cooperative wage bargaining model in which preferences of both parties, a union and a firm, are expressed by the sequences of discount rates varying in time. For such a wage bargaining with non-stationary preferences, we determine subgame perfect equilibria between the union and the firm for the case when the union is supposed to go on strike in each period in wh...

We study house allocation problems introduced by Shapley and Scarf (1974). We prove that a mechanism (a social choice function) is individually rational, anonymous, strategy-proof, and non-bossy (but not necessarily Pareto efficient) if and only if it is either the core mechanism or the no-trade mechanism, where the no-trade mechanism is the one that selects the initial allocation for each prof...