Subgame perfect equilibria of sequential matching games

Abstract

We study a decentralized matching market in which firms sequentially make offers to potential workers. For each offer, the worker can choose "accept" or "reject," but the decision is irrevocable. The acceptance of an offer guarantees her job at the firm, but it may also eliminate chances of better offers from other firms in the future. We formulate this market as a perfect-information extensive-form game played by the workers. Each instance of this game has a unique subgame perfect equilibrium (SPE), which does not necessarily lead to a stable matching and has some perplexing properties. We show a dichotomy result that characterizes the complexity of computing the SPE. The computation is tractable if each firm makes offers to at most two workers or each worker receives offers from at most two firms. In contrast, it is PSPACE-hard even if both firms and workers are related to at most three offers. We also study engineering aspects of this matching market. It is shown that, for any preference profile, we can design an offering schedule of firms so that the worker-optimal stable matching is realized in the SPE.