In this paper, we analyze capacity manipulation games in hospital-intern markets inspired by the real-life entry-level labor markets for young physicians seeking residencies at hospitals. In these markets, where the matching is determined by a centralized clearinghouse called the National Residency Matching Program (NRMP) in the USA, hospitals usually report the number of vacant positions to the NRMP as well as their preferences. We consider a model where preferences of hospitals and interns are common knowledge, and hospitals play a game of reporting their capacities. We characterize the equilibria of the game-form for the two most widely used stable rules: hospital-optimal and intern-optimal stable rules. We show that (i) there may not be a pure strategy equilibrium in general; and (ii) when a pure strategy equilibrium exists other than true-capacities, truthful capacity revelation is weakly Pareto-dominated for hospitals. We also analyze other properties of the set of Nash equilibria. Finally, we present sufficient conditions on preferences to guarantee the existence of pure strategy equilibria.
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Length: 30 pages Date of creation: 01 Oct 2001 Date of revision:
31 Jul 2002 Publication status: published, Social Choice and Welfare 27, 3-24 (2006) Handle: RePEc:boc:bocoec:515
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Find related papers by JEL classification: C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
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