2-SIDED MATCHING PROBLEMS WITH EXTERNALITIES

In this paper, we develop a model of two-sided matching markets with e xternalities. A new concept of stability of matchings is proposed and it is shown to be the unique one that ensures the general existence. M oreover, it is demonstrated that our stability does not contradict Par eto optimality. Some extensions of the model are also discussed. Journ al of Economic Literature Classification Numbers: C71, C78, D62. (C) 1 996 Academic Press, Inc.