Stable, Not Fair

An equilibrium is stable — but stable does not mean good for everyone. A price war that traps two stores at thin margins is an equilibrium too; nobody escapes alone.

This insight reshaped real markets. The matching system that pairs new doctors with hospitals, designed by Gale and Shapley, finds a stable set of pairings where no doctor and hospital would both rather ditch their match for each other. Stability is the goal, not happiness.