Stochastic sorting
Abstract
In many economic settings, matching takes place under imperfect information about agents’ characteristics that are payoff-relevant to the match. This paper develops a matching model in which agents’ payoff-relevant characteristics are realized after matching takes place, and matching is based on the agents’ observable ex-ante characteristics, which stochastically determine the payoff-relevant ones. We derive conditions for positive and negative sorting. The conditions differ depending on whether agents’ characteristics are stochastically larger or more variable as a function of the agents’ ex-ante attributes. We apply our framework to risk sharing and household income inequality.
Fields of Study & Subjects
Markov Chains and Monte Carlo Methods
Distributed systems and fault tolerance
Algorithms and Data Compression
Publication details
- Journal / source
- Journal of Economic Theory
- Publisher
- Elsevier BV
- Volume
- 233
- Pages
- 106146–106146
- Publication date
- 19 February 2026
- Language
- EN