Large random matching markets with localized preference structures can exhibit large cores

Abstract

I present a class of models for random matching markets with non-homogeneous agent preferences, drawn from the computer science literature on network structure. An analogue of the Watts–Strogatz (1998) ‘small-world’ network model supports significant incentives to manipulate matching outcomes. The scope for manipulation remains substantial as markets become large and unbalanced—contrasting prior work which found little scope under uniform or homogeneous random preferences. This scope for manipulation directly corresponds to core size and differences in agents' welfare between core outcomes. These results suggest largeness and cross-side imbalance may be insufficient to fully explain small cores in matching markets; I discuss alternative explanations.