Chapter 16 Two-sided matching

This chapter discusses the games that are two-sided matching markets. The phrase two-sided refers to the fact that agents in such markets belong, from the outset, to one of two disjoint sets-e.g, firms or workers. The term matching refers to the bilateral nature of exchange in these markets. The game-theoretic analysis of these markets has proved useful in various empirically oriented studies. This chapter describes some of the phenomena the theory should be able to explain, and concludes by returning to consider how the theory addresses the empirical questions raised at the beginning. The chapter focuses on both the core of the game and the dominant and equilibrium strategies under various rules about how the game might be played. The distinction between cooperative and noncooperative game theory is often somewhat artificial because the tools of both kinds of theory can be used to study the same phenomena.