Arbitrated matching: Formulation and protocol

This paper presents an arbitration approach to bipartite matching in which a set of actors are matched up with a set of mates in a one-to-one manner. The arbitration is composed of two stages, viz. stage I in which ordinal preference is elicited on a need-to basis until all stable matchings are obtained. Stage II is sequential bargaining in which risk preference information is extracted by eliciting certainty equivalents of default randomizations declared by the arbitrator. Stage II comes out with a particular stable subset, randomization of which is preferable for all, to that of the entire stable set. Stage II is particularly effective when actors and mates are risk-averse, whence reducing uncertainty with a smaller randomization set proves to be advantageous to all. We also prove that it is superior to the traditional one-off approach in terms of the elicitation effort required as well as strategyproofness.