Constraints on Matching Markets Based on Moral Concerns

38 Pages Posted: 2 Jun 2015

See all articles by Katharina Huesmann

Katharina Huesmann

University of Cologne - Faculty of Management, Economics and Social Sciences

Achim Wambach

ZEW – Leibniz Centre for European Economic Research; University of Mannheim; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Date Written: May 29, 2015

Abstract

Various markets ban or heavily restrict monetary transfers. This is often motivated by moral concerns. However, it appears to be disputable whether the observed restrictions on transfers are the appropriate market design answer to these concerns. Instead of exogenously restricting transfers on a matching market, we introduce a desideratum based on fairness objectives and study its market design implications. The desideratum we concentrate on is discrimination-freeness, i.e. one’s access to certain resources is independent of one’s wealth endowment. A key assumption in our model is that preferences are not quasilinear but wealth has an impact on the willingness to pay. We show that matchings without transfers based on ordinal object rankings are at the efficient frontier of discrimination-free social choice functions. Implementable social choice functions are discrimination-free if and only if an agent’s object assignment only depends on ordinal object rankings and her money assignment is constant. If money can be used outside the market designer’s control even externality-freeness is needed: an agent’s object assignment has to be independent of other agents’ types. We discuss several applications in the context of discrimination-freeness including compensation for kidney donors.

Keywords: repugnance, inequality, market design, matching markets

JEL Classification: D470, D630, I000, D610, D820

Suggested Citation

Huesmann, Katharina and Wambach, Achim, Constraints on Matching Markets Based on Moral Concerns (May 29, 2015). CESifo Working Paper Series No. 5356, Available at SSRN: https://ssrn.com/abstract=2613355

Katharina Huesmann

University of Cologne - Faculty of Management, Economics and Social Sciences ( email )

Richard-Strauss-Str. 2
Cologne, D-50923
Germany

Achim Wambach (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

University of Mannheim ( email )

Universitaetsbibliothek Mannheim
Zeitschriftenabteilung
Mannheim, 68131
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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