AbstractWe introduce a new class of matching problems that mimics the tuition exchange programs employed by colleges in the US to enable the dependents of their eligible faculty to use their tuition benefits at other participating institutions. Each participating college has to maintain a balance between exported and imported students; a negative balance with exports exceeding imports is generally penalized by suspension from the program. On the other hand, these programs function through decentralized markets that make it difficult to sustain a balance. We show that any unbalanced market equilibrium respecting stability causes a race to the bottom by discouraging negative–balance colleges from exchange. To correct this failure, we propose a new centralized mechanism, two–sided top trading cycles (2S-TTC), a variant of the well–known TTC mechanism. This is the first time a one–sided matching mechanism has been modified for a two–sided market. This mechanism selects a balanced–efficient matching that cannot be manipulated by students and it respects internal priority bylaws of colleges regarding dependent eligibility. Moreover, it makes full participation a dominant strategy for colleges, thus encouraging exchange. We also show that 2S-TTC is the unique optimal mechanism fulfilling these objectives. There also exist tuition co-ops where maintaining a one–to–one balance is not the first objective. For these programs, to minimize imbalance while respecting stability, we also propose a new flexible mechanism with desirable properties.
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Bibliographic InfoPaper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 815.
Date of creation: 25 Nov 2012
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Postal: Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA
Web page: http://fmwww.bc.edu/EC/
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Market Design; Matching Theory; Tuition Exchange; Balanced Exchange; Two–sided Matching; Two–sided Top Trading Cycles;
Find related papers by JEL classification:
- C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-12-10 (All new papers)
- NEP-GTH-2012-12-10 (Game Theory)
- NEP-MIC-2012-12-10 (Microeconomics)
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- Kesten, Onur, 2006. "On two competing mechanisms for priority-based allocation problems," Journal of Economic Theory, Elsevier, vol. 127(1), pages 155-171, March.
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