Dynamic Reserves in Matching Markets

57 Pages Posted: 7 Mar 2016 Last revised: 9 Nov 2018

See all articles by Orhan Aygun

Orhan Aygun

Bogazici University

Bertan Turhan

Carnegie Mellon University; ITAM

Date Written: October 30, 2018

Abstract

We study a school choice problem under affirmative action policies where authorities reserve certain fractions of the seats at each school to specific student groups, and students have preferences not only over the schools they are matched to but also what type of seats they receive. Such reservation policies might cause waste when there is low 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 transferring otherwise vacant seats from low-demand groups to high demand-groups. We analyze the properties of the choice functions in this family. We propose the cumulative offer mechanism as an allocation function 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 in school priorities. Furthermore, we provide comparative statics results on capacity transfer schemes one of which is that transferring more of otherwise vacant slots leads to strategy proof Pareto improvement under the cumulative offer mechanism.

Keywords: Affirmative Action, Dynamic Reserves, Market Design, Matching with Contracts, Strategy-Proofness, School Choice

JEL Classification: C78, D63, D78, J15

Suggested Citation

Aygun, Orhan and Turhan, Bertan, Dynamic Reserves in Matching Markets (October 30, 2018). Available at SSRN: https://ssrn.com/abstract=2743000 or http://dx.doi.org/10.2139/ssrn.2743000

Orhan Aygun

Bogazici University ( email )

Bebek, İstanbul 34342
Turkey

Bertan Turhan (Contact Author)

Carnegie Mellon University ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

ITAM ( email )

Av Camino a Santa Teresa 930, Magdalena Contreras
Col. Héroes de Padierna
Mexico City, Federal District 10700
Mexico

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