Sunbelt XXXI International Network for Social Network ... - INSNA

Using Social Networks To Characterize Peer Effects And Instability In Matching MarketsBodine‐Baron, Elizabeth A.; Hassibi, Babak; Wierman, AdamNetworks and EconomicsSocial Welfare, Graph Theory, Agent Based Models, Peer Effects, Matching Markets, StabilityFRI.PM2Many‐to‐one matching markets exist in many different forms, such as college admissions, matching medical interns to hospitals for residencies, assigninghousing to freshman students, and the classic firms and workers market. In these markets, externalities such as complementarities (colleges caring aboutdiversity) and peer effects (students wanting to attend the same college as their friends) severely complicate the preference ordering of each agent. Further,past research has shown that externalities lead to serious problems in market stability and algorithms for finding matchings. We propose a formulation of themany‐to‐one matching market where the effects of externalities are derived from an underlying social network. Within this framework, we prove the existenceof a stable matching in every many‐to‐one market, and we give bounds on the worst‐case social welfare of any stable matching.