Near-Feasible Stable Matchings with Budget Constraints

Abstract: We consider the matching with contracts framework of Hatfield and Milgrom when one side (a firm or hospital) can make monetary transfers (offer wages) to the other (a worker or doctor). In a standard model, monetary transfers are not restricted. However, we assume that each hospital has a fixed budget; that is, the total amount of wages allocated by each hospital to the doctors is constrained. With this constraint, stable matchings may fail to exist and checking for the existence is hard. To deal with the nonexistence, we focus on near-feasible matchings that can exceed each hospital budget by a certain amount, and We introduce a new concept of compatibility. We show that the compatibility condition is a sufficient condition for the existence of a near-feasible stable matching in the matching with contracts framework. Under a slight restriction on hospitals' preferences, we provide mechanisms that efficiently return a near-feasible stable matching with respect to the actual amount of wages allocated by each hospital. By sacrificing strategy-proofness, the best possible bound of budget excess is achieved.