Efficiency and Stability in Large Matching Markets

83 Pages Posted: 1 Aug 2015

See all articles by Yeon-Koo Che

Yeon-Koo Che

Columbia University

Olivier Tercieux

Paris-Jourdan Sciences Economiques (PSE)

Date Written: July 30, 2015

Abstract

We study efficient and stable mechanisms in matching markets when the number of agents is large and individuals’ preferences and priorities are drawn randomly. When agents’ preferences are uncorrelated, then both efficiency and stability can be achieved in an asymptotic sense via standard mechanisms such as deferred acceptance and top trading cycles. When agents’ preferences are correlated over objects, however, these mechanisms are either inefficient or unstable even in an asymptotic sense. We propose a variant of deferred acceptance that is asymptotically efficient, asymptotically stable and asymptotically incentive compatible. This new mechanism performs well in a counterfactual calibration based on New York City school choice data.

Keywords: Large matching markets, Pareto efficiency, Stability, Fairness, Payoff equivalence, Asymptotic efficiency, and Asymptotic stability

JEL Classification: C70, D47, D61, D63

Suggested Citation

Che, Yeon-Koo and Tercieux, Olivier, Efficiency and Stability in Large Matching Markets (July 30, 2015). Cowles Foundation Discussion Paper No. 2013, Available at SSRN: https://ssrn.com/abstract=2638009 or http://dx.doi.org/10.2139/ssrn.2638009

Yeon-Koo Che (Contact Author)

Columbia University ( email )

420 W. 118th Street, 1016IAB
New York, NY 10027
United States
212-854-8276 (Phone)

HOME PAGE: http://www.columbia.edu/~yc2271

Olivier Tercieux

Paris-Jourdan Sciences Economiques (PSE) ( email )

48, BD Jourdan
75014 Paris
France

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