7 - Matching on the Marriage Market: Theory

Summary

Individuals in society have many potential partners. This situation creates competition over the potential gains from marriage. In modern societies, explicit price mechanisms are not observed. Nevertheless, the assignment of partners and the sharing of the gains from marriage can be analyzed within a market framework. The main insight of this approach is that the decision to form and maintain a particular union depends on the whole range of opportunities and not only on the merits of the specific match. However, the absence of explicit prices raises important informational issues. There are two main issues distinguishing the approaches used in the matching literature. The first issue concerns the information structure, and the second relates to the extent of transferability of resources among agents with different attributes. Specifically, models based on frictionless matching assume that perfect and costless information about potential matches is available to all participants; the resulting choices exclusively reflect the interaction of individual preferences. Such models may belong to several classes depending on whether or not compensating transfers are allowed to take place between individuals and, if so, at what “exchange rate.” Still, they all rely on a specific equilibrium concept, namely, stability. Formally, we say that a matching is stable if

1. There is no married person who would rather be single.

2. There are no two (married or unmarried) persons who prefer to form a new union.

The interest in stable marriage assignments arises from the presumption that in a frictionless world, a marriage structure that fails to satisfy (1) and (2) either will not form or will not survive.