On Human Capital and Team Stability

TL;DR

This paper explores the stability of team formations in economic settings, demonstrating that stable matchings are achievable with minimal intervention when individuals have close substitutes, and connecting these findings to broader roommate and labor market contexts.

Contribution

It introduces conditions under which stable matchings exist in roommate problems with transferable utility, extending empirical tools to new economic matching scenarios.

Findings

Stable matchings can be implemented with minimal policy intervention.

Close substitutes among individuals facilitate stable team formations.

Tools from marriage problem studies are adaptable to roommate matching contexts.

Abstract

In many economic contexts, agents from a same population team up to better exploit their human capital. In such contexts (often called "roommate matching problems"), stable matchings may fail to exist even when utility is transferable. We show that when each individual has a close substitute, a stable matching can be implemented with minimal policy intervention. Our results shed light on the stability of partnerships on the labor market. Moreover, they imply that the tools crafted in empirical studies of the marriage problem can easily be adapted to many roommate problems.