The Third Conference on Auctions, Market Mechanisms and Their Applications

Research Article

Short Lists in Centralized Clearinghouses

  • @INPROCEEDINGS{10.4108/eai.8-8-2015.2260677,
        author={Nicholas Arnosti},
        title={Short Lists in Centralized Clearinghouses},
        proceedings={The Third Conference on Auctions, Market Mechanisms and Their Applications},
        publisher={ACM},
        proceedings_a={AMMA},
        year={2015},
        month={8},
        keywords={matching market design frictions school choice},
        doi={10.4108/eai.8-8-2015.2260677}
    }
    
  • Nicholas Arnosti
    Year: 2015
    Short Lists in Centralized Clearinghouses
    AMMA
    ICST
    DOI: 10.4108/eai.8-8-2015.2260677
Nicholas Arnosti1,*
  • 1: Stanford University
*Contact email: narnosti@stanford.edu

Abstract

Stable matching mechanisms are used to clear many two-sided markets. In most settings, frictions cause participants to submit short preference lists (even if there are many potentially acceptable matches). As a result, many agents on both sides go unmatched.

This paper studies the way that correlations in agent preferences influence the quantity and quality of matches formed in the marketplace. I consider three canonical preference structures: fully independent (or idiosyncratic) preferences, vertical preferences (agents agree on the attractiveness of those on the opposite side), and aligned preferences (potential partners agree on the attractiveness of their match).

I find that when agent preferences are idiosyncratic, more matches form than when agents are vertically differentiated. Perhaps more surprisingly, I show that the case of aligned preferences causes the fewest matches to form. When considering quality of matches, the story reverses itself: aligned preferences produce the most high quality matches, followed by correlated preferences, with independent preferences producing the fewest.

These facts have implications for the design of priority structures and tie-breaking procedures in school choice settings, as they point to a fundamental tradeoff between matching many students, and maximizing the number of students who get one of their top choices.