Dynamic Reserves in Matching Markets
30 Pages Posted: 7 Mar 2016 Last revised: 27 Apr 2020
Date Written: October 30, 2018
We study a school choice problem under affirmative action policies where authorities reserve a certain fraction of the slots at each school for specific student groups, and where students have preferences not only over the schools they are matched to but also the type of slots they receive. Such reservation policies might cause waste in instances of low student demand from some student groups. To propose a solution to this issue, we construct a family of choice functions, dynamic reserves choice functions, for schools that respect within-group fairness and allow the transfer of otherwise vacant slots from low-demand groups to high-demand groups. We propose the cumulative offer mechanism (COM) as an allocation rule where each school uses a dynamic reserves choice function and show that it is stable with respect to schools’ choice functions, is strategy-proof, and respects improvements. Furthermore, we show that transferring more of the otherwise vacant slots leads to strategy-proof Pareto improvement under the COM.
Keywords: Affirmative Action, Dynamic Reserves, Market Design, Matching with Contracts, Strategy-Proofness, School Choice
JEL Classification: C78, D47, D63, D78
Suggested Citation: Suggested Citation