Stable Matching with Peer-Dependent Preferences: Existence and Cutoff Characterization

Abstract

This paper presents a framework for stable matching markets that accommodates the peer-dependent preferences employed in empirical work. We show the existence of a stable matching in a continuum economy and of an approximately stable matching in a large finite sampled economy under assumptions satisfied by standard empirical specifications. The analysis builds on a tractable characterization of stable matchings with peer-dependent preferences in terms of supply and demand equations along with a rational-expectations condition.