Implementation of assortative matching under incomplete information

Abstract

This paper provides a unifying framework for matching markets with incomplete information in which the positive assortative match is always efficient. I construct a Vickrey-Clarke-Groves-like mechanism which implements the positive assortative match as an ex post Nash equilibrium. It achieves this result by using a payment rule that distinguishes between an agent deprived of any match and an agent who merely receives a reduced match value. The constructed mechanism recognizes only opportunity costs arising from the former, and not the latter, effect. I also generalize the stronger condition of envy freeness to these incomplete information environments and show that the constructed equilibrium is envy free.