On Human Capital and Team Stability

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.