A dilemma between equality and social exclusion a mechanism for generating inequality through matching on social networks

A matching theory provides the perspective on the resource allocation or exchange of indivisible goods under the competitive condition. Most of the recent work in economics has concentrated on the question of how a policy maker or social planner should design the matching algorithm from the viewpoint of stability, Pareto efficiency, and strategy-proofness. By contrast, the current study treats matching algorithm as the rule of social interactions, not as just a calculation process and focuses on social inequality of the resulting matching outcome. We construct a model in which players are located on social network. The players chose other linked player as their partner according to the rule resembling Gale-Shapley's Deferred Acceptance algorithm and then share their ability or resources with their partner. We assume that the resource of unmatched player (called "excluded player") is discounted. Under this condition, we investigate how the structure of social networks affects the degree of social inequality and what type of player pair with what type of partner through computer simulation. The simulation shows that the social networks whose variance of degree is higher exacerbate society-wide inequality even though they limit the inequality gap only among the matched players. Additionally, we find that the more players have links, the more capable partner they can pair with. The empirical implications and the contribution of our framework to normative theory are also discussed.