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Unraveling Results from Comparable Demand and Supply: An Experimental Investigation

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Author Info
Muriel Niederle (Stanford University)
Alvin E. Roth (Harvard University)
M. Utku Ünver (Boston College)

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Abstract

Markets sometimes unravel, with offers becoming inefficiently early. Often this is attributed to competition arising from an imbalance of demand and supply, typically excess demand for workers. However this presents a puzzle, since unraveling can only occur when firms are willing to make early offers and workers are willing to accept them. We present a model and experiment in which workers’ quality becomes known only in the late part of the market. However, in equilibrium, matching can occur (inefficiently) early only when there is comparable demand and supply: a surplus of applicants, but a shortage of high quality applicants.

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File URL: http://fmwww.bc.edu/EC-P/WP718.pdf
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Publisher Info
Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 718.

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Date of creation: 17 Sep 2008
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Handle: RePEc:boc:bocoec:718

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Related research
Keywords: Matching; Unraveling; Experiments; Market Design; Labor Demand and Supply;

Find related papers by JEL classification:
C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

References listed on IDEAS
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  1. Roth, Alvin E & Xing, Xiaolin, 1997. "Turnaround Time and Bottlenecks in Market Clearing: Decentralized Matching in the Market for Clinical Psychologists," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 284-329, April.
  2. Muriel Niederle & Alvin E. Roth, 2003. "Unraveling Reduces Mobility in a Labor Market: Gastroenterology with and without a Centralized Match," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1342-1352, December. [Downloadable!] (restricted)
  3. C. Nicholas McKinney & Muriel Niederle & Alvin E. Roth, 2005. "The Collapse of a Medical Labor Clearinghouse (and Why Such Failures Are Rare)," American Economic Review, American Economic Association, vol. 95(3), pages 878-889, June. [Downloadable!]
  4. Hao Li & Wing Suen, 2000. "Risk Sharing, Sorting, and Early Contracting," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 1058-1087, October. [Downloadable!] (restricted)
  5. Alvin E Roth & Richard A Posner & Christine Jolls & Christopher Avery, 2007. "The New Market for Federal Judicial Law Clerks," Levine's Bibliography 843644000000000288, UCLA Department of Economics. [Downloadable!]
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  6. John H. Kagel & Alvin E. Roth, 2000. "The Dynamics Of Reorganization In Matching Markets: A Laboratory Experiment Motivated By A Natural Experiment," The Quarterly Journal of Economics, MIT Press, vol. 115(1), pages 201-235, February. [Downloadable!] (restricted)
  7. Ettore Damiano, 2005. "Unravelling of Dynamic Sorting," Review of Economic Studies, Blackwell Publishing, vol. 72(4), pages 1057-1076, October. [Downloadable!] (restricted)
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  8. Alvin E. Roth & Elliott Peranson, 1999. "The Redesign of the Matching Market for American Physicians: Some Engineering Aspects of Economic Design," NBER Working Papers 6963, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. M. Utku Ünver, 2005. "On the survival of some unstable two-sided matching mechanisms," International Journal of Game Theory, Springer, vol. 33(2), pages 239-254, 06. [Downloadable!] (restricted)
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  10. Roth, Alvin E, 1984. "The Evolution of the Labor Market for Medical Interns and Residents: A Case Study in Game Theory," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 991-1016, December. [Downloadable!] (restricted)
  11. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June. [Downloadable!] (restricted)
  12. Haruvy, Ernan & Roth, Alvin E. & Unver, M. Utku, 2006. "The dynamics of law clerk matching: An experimental and computational investigation of proposals for reform of the market," Journal of Economic Dynamics and Control, Elsevier, vol. 30(3), pages 457-486, March. [Downloadable!] (restricted)
    Other versions:
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