Incomplete Information and Small Cores in Matching Markets

• Authors: Jordi Massó.
• BSE Working Paper: 110620 | September 15
• Keywords: matching market , Incomplete Information , Small Core
• JEL codes: C78, D81, J44
• matching market
• Incomplete Information
• Small Core

We study Bayesian Nash equilibria of stable mechanisms in centralized matching markets under incomplete information. We show that truth-telling is a Bayesian Nash equilibrium of the revelation game induced by a common belief and a stable mechanism if and only if all the profiles in the support of the common belief have singleton cores. Our result matches the observations of Roth and Peranson (1999) in the National Resident Matching Program (NRMP) in the United States: (i) the cores of the profiles submitted to the clearinghouse are small and (ii) while truth-telling is not a dominant strategy most participants of the NRMP truthfully reveal their preferences.