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Cost of transformation: a measure on matchings

Author

Listed:
  • Burak Can

    (Department of Data Analytics and Digitalisation, Maastricht University)

  • Mohsen Pourpouneh

    (Department of Food and Resource Economics, University of Copenhagen)

  • Ton Storcken

    (Department of Quantitative Economics, Maastricht University)

Abstract

This paper constructs a normative framework to quantify the difference (distance) between outcomes of market mechanisms in matching markets. We investigate the "cost of transformation" from one market mechanism to another, based on the differences in the outputs of these mechanisms, i.e., the matchings. Several conditions are introduced to ensure that this cost reflects the welfare effect of the transformation on individuals. We find a class of measures called scaled Borda measures, which is characterized by these conditions. Several possible applications of these measures in different markets are also discussed, such as measuring how unstable, how unfair, or how inefficient a mechanism (or a matching) is.

Suggested Citation

  • Burak Can & Mohsen Pourpouneh & Ton Storcken, 2020. "Cost of transformation: a measure on matchings," IFRO Working Paper 2020/10, University of Copenhagen, Department of Food and Resource Economics.
    • Handle: RePEc:foi:wpaper:2020_10
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    File URL: http://okonomi.foi.dk/workingpapers/WPpdf/WP2020/IFRO_WP_2020_10.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    matching markets; distance function; metrics; cost of stability;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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