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Review of Economic Studies Vol. 88 No. 3 2021

Stability, Strategy-Proofness, and Cumulative Offer Mechanisms

John William Hatfield1; Scott Duke Kominers2; Alexander Westkamp3

1 McCombs School of Business, University of Texas at Austin , · 2 Harvard Business School & Department of Economics, Harvard University · 3 Department of Management, Economics, and Social Sciences, University of Cologne

Abstract

We characterize when a stable and strategy-proof mechanism is guaranteed to exist in the setting of many-to-one matching with contracts. We introduce three novel conditions—observable substitutability, observable size monotonicity, and non-manipulability via contractual terms—and show that when these conditions are satisfied, the cumulative offer mechanism is the unique mechanism that is stable and strategy-proof (for workers). Moreover, we show that our three conditions are, in a sense, necessary: if the choice function of some firm fails any of our three conditions, we can construct unit-demand choice functions for the other firms such that no stable and strategy-proof mechanism exists. Thus, our results provide a rationale for the ubiquity of cumulative offer mechanisms in practice.

DOI
10.1093/restud/rdaa052
Volume
88
Issue
3
Pages
1457-1502
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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