Firing the Wrong Workers: Financing Constraints and Labour Misallocation

• Authors: Andrea Caggese, Vicente Cuñat and Daniel Metzger
• Journal of Financial Economics, Vol. 133, No. 3, 589-607, November 2017

This paper deals with roommate problems (Gale and Shapley, Am Math Mon 69(1):9–15, 1962) that are solvable, i.e., have a non-empty core (set of stable matchings). We study rank-fairness within pairs of stable matchings and the size of the core by means of maximal and average rank gaps. We provide upper bounds in terms of maximal and average disagreements in the agents’ rankings. Finally, we show that most of our bounds are tight.