Abstract
The paper surveys the experimental literature on centralized matching markets, covering school choice and college admissions models. In the school choice model, one side of the market (schools) is not strategic, and rules (priorities) guide the acceptance decisions. The model covers applications such as school choice programs, centralized university admissions in many countries, and the centralized assignment of teachers to schools. In the college admissions model, both sides of the market are strategic. It applies to college and university admissions in countries where universities can select students, and centralized labor markets such as the assignment of doctors to hospitals. The survey discusses, among other things, the comparison of various centralized mechanisms, the optimality of participants’ strategies, learning by applicants and their behavioral biases, as well as the role of communication, information, and advice. The main experimental findings considered in the survey concern truth-telling and strategic manipulations by the agents, as well as the stability and efficiency of the matching outcome.
Highlights
For a long time, economists have focused on markets where prices coordinate demand and supply
1 We focus on experiments based on the school choice and the college admissions model which are not part of the survey chapter by Roth (2015)
Despite the fact that in theory Boston mechanism (BOS) can improve on deferred acceptance (DA) with respect to efficiency, the prediction typically fails in experiments due to the low percentage of equilibrium outcomes reached under BOS
Summary
Economists have focused on markets where prices coordinate demand and supply. School choice problems are characterized by the preferences of participants, and by the size of the market, by whether schools have preferences or follow rules when ranking students, the amount of information provided about own and others’ preferences, and the capacities of schools For this reason and because the literature is still relatively young, there are fewer replications than in other areas of experimental economics. Subjects often have a weakly dominant strategy of reporting truthfully in strategy-proof mechanisms, and not every deviation from truthful reporting influences the resulting allocation For this reason, some papers (typically papers that compare allocations reached by different mechanisms) study the stability and Pareto efficiency of the matching outcomes. In the case of the top trading cycles mechanism (TTC), the emphasis is on efficiency, as TTC is predicted to produce Pareto-efficient allocations that are not necessarily stable
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