Matching: Finding a Partner for Life or Otherwise

How do job-worker and husband-wife relationships form, and why do some matched pairs subsequently separate? Economists and game theorists are in the process of developing and applying an equilibrium explanation of match formation and separation based on the principle of voluntary pairing under competitive conditions. The purpose of this paper is to assess the current state of these developments. The general existence of patnership structures with the property that no one has an incentive to separate has been established. These equilibrium structures maximize aggregate "value" over the set of all feasible match structures in the transferable utility case. According to this pure theory of matching, competition for partners can be expected to yield equilibrium match structures that are both stable and socially efficient, at least under conditions of frictionless certainty. Search-theoretic models that take account of meeting costs and initial uncertainty about match values have been developed to explain separation behavior as a process of shopping for a "good match." These models suggest several possible social inefficiencies in the match formation and separation processes. Finally, labor economists have recently provided empirical evidence that supports this view of the process.