Matching, Unanticipated Experiences, Divorce, Flirting, Rematching, Etc

Abstract: We study dynamic decentralized two-sided matching in which players may encounter unanticipated experiences. As they become aware of these experiences, they may change their preferences over players on the other side of the market. Consequently, they may get ``divorced'' and rematch again with other agents, which may lead to further unanticipated experiences etc. A matching is stable if there is absence of pairwise common belief in blocking. Stable matchings can be destabilized by unanticipated experiences. Yet, we show that there exist self-confirming outcomes that are stable and do not lead to further unanticipated experiences. We introduce a natural decentralized matching process that, at each period assigns probability $1 - \varepsilon$ to the satisfaction of a mutual optimal blocking pair (if it exists) and picks any optimal blocking pair otherwise. The parameter $\varepsilon$ is interpreted as a friction of the matching market. We show that for any decentralized matching process, frictions are necessary for convergence to stability even without unawareness. Our process converges to self-confirming stable outcomes. Further, we allow for bilateral communication/flirting that changes the awareness and say that a matching is flirt-proof stable if there is absence of communication leading to pairwise common belief in blocking. We show that our natural decentralized matching process converges to flirt-proof self-confirming outcomes.