The Stable Matching Problem originated, in part, in 1962, when David Gale and Lloyd Shapley, two mathematical economists, asked the question: Could one design a college admissions process, or a job recruiting process, that was self-enforcing? What did they mean by this?
To set up the question, let’s first think informally about the kind of situation that might arise as a group of friends, all juniors in college majoring in computer science, begin applying to companies for summer internships. The crux of the application process is the interplay between two different types of parties: companies (the employers) and students (the applicants). Each applicant has a preference ordering on companies, and each company—once the applications come in--forms a preference ordering on its applicants. Based on these preferences, companies extend offers to some of their applicants, applicants choose which of their offers to accept, and people begin heading off to their summer internships.
Gale and Shapley considered the sorts of things that could start going wrong with this process, in the absence of any mechanism to enforce the status quo. Suppose, for example, that your friend Raj has just accepted a summer job at the large telecommunications company CluNet. A few days later, the small start-up company WebExodus, which had been dragging its feet on making a few final decisions, calls up Rai and offers him a summer iob as well. Now, Raj actually prefers WebExodus to CluNet--won over perhaps by the laid-back, anything-can-happen atmosphere--and so this new development may well cause him to retract his acceptance of the CluNet offer and go to WebExodus instead. Suddenly down one summer intern, CluNet offers a job to one of its wait-listed applicants, who promptly retracts his previous acceptance of an offer from the software giant Babelsoft, and the situation begins to spiral out of control.
Things look just as bad, if not worse, from the other direction. Suppose
that Raj’s friend Chelsea, destined to go to Babelsoft but having just heard Raj’s story, calls up the people at WebExodus and says, "You know, I’d really rather spend the summer with you guys than at Babelsoft." They find this very easy to believe; and furthermore, on looking at Chelsea’s application, they realize that they would have rather hired her than some other student who actually is scheduled to spend the summer at WebExodus. In this case, if WebExodus were a slightly less scrupulous company, it might well find some way to retract its offer to this other student and hire Chelsea instead.
Situations like this can rapidly generate a lot of chaos, and many people-- both applicants and employers--can end up unhappy with the process as well as the outcome. What has gone wrong? One basic problem is that the process is not self-enforcing--if people are allowed to act in their self-interest, then it risks breaking down.
We might well prefer the following, more stable situation, in which selfinterest itself prevents offers from being retracted and redirected. Consider another student, who has arranged to spend the summer at CluNet but calls up WebExodus and reveals that he, too, would rather work for them. But in this case, based on the offers already accepted, they are able to reply, "No, it turns out that we prefer each of the students we’ve accepted to you, so we’re afraid there’s nothing we can do." Or consider an employer, earnestly following up with its top applicants who went elsewhere, being told by each of them, "No, I’m happy where I am." In such a case, all the outcomes are stable—there are no further outside deals that can be made.
So this is the question Gale and Shapley asked: Given a set of preferences among employers and applicants, can we assign applicants to employers so that for every employer E, and every applicant A who is not scheduled to work for E, at least one of the following two things is the case?
(i) E prefers every one of its accepted applicants to A; or
(ii) A prefers her current situation over working for employer E.
If this holds, the outcome is stable: individual self-interest will prevent any applicant/employer deal from being made behind the scenes.