Competitive Equilibrium from Equal Incomes for Two-Sided Matching
AbstractCompetitive Equilibrium from Equal Incomes for Two-Sided Matching Using the assignment of students to schools as our leading example, we study many-to-one two-sided matching markets without transfers. Students are endowed with cardinal preferences and schools with ordinal ones, while preferences of both sides need not be strict. Using the idea of a competitive equilibrium from equal incomes (CEEI, Hylland and Zeckhauser (1979)), we propose a new mechanism, the Generalized CEEI, in which students face di¤erent prices depending on how schools rank them. It always produces fair (justified-envy-free) and ex ante e¢ cient random assignments and stable deterministic assignments if both students and schools are truth-telling. We show that each student's incentive to misreport vanishes when the market becomes large, given all others are truthful. The mechanism is particularly relevant to school choice as schools' priority orderings over students are usually known and can be considered as their ordinal preferences. More importantly, in settings like school choice where agents have similar ordinal preferences, the mechanismis explicit use of cardinal preferences may significantly improve eficiency. We also discuss its application in school choice with group-specific quotas and in one-sided matching.
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Bibliographic InfoPaper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 12-344.
Date of creation: Oct 2012
Date of revision:
Other versions of this item:
- Yinghua He & Antonio Miralles & Jianye Yan, 2012. "Competitive Equilibrium from Equal Incomes for Two-Sided Matching," Working Papers 692, Barcelona Graduate School of Economics.
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- I29 - Health, Education, and Welfare - - Education - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-11-17 (All new papers)
- NEP-GTH-2012-11-17 (Game Theory)
- NEP-URE-2012-11-17 (Urban & Real Estate Economics)
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