Matching in Networks with Bilateral Contracts

John William  Hatfield; Scott Duke Kominers

Article | American Economic Journal: Microeconomics

Matching in Networks with Bilateral Contracts

by John William Hatfield and Scott Duke Kominers

Abstract

We introduce a model in which firms trade goods via bilateral contracts which specify a buyer, a seller, and the terms of the exchange. This setting subsumes (many-to-many) matching with contracts, as well as supply chain matching. When firms' relationships do not exhibit a supply chain structure, stable allocations need not exist. By contrast, in the presence of supply chain structure, a natural substitutability condition characterizes the maximal domain of firm preferences for which stable allocations are guaranteed to exist. Furthermore, the classical lattice structure, rural hospitals theorem, and one-sided strategy-proofness results all generalize to this setting. (JEL C78, D85, D86, L14)

Keywords: Contracts; Market Design; Marketplace Matching; Supply Chain;

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Hatfield, John William, and Scott Duke Kominers. "Matching in Networks with Bilateral Contracts." American Economic Journal: Microeconomics 4, no. 1 (February 2012): 176–208.

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Matching in Networks with Bilateral Contracts

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