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Information Disclosure and Unraveling in Matching Markets

Author

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  • Michael Ostrovsky
  • Michael Schwarz

Abstract

This paper explores information disclosure in matching markets. A school may suppress some information about students in order to improve their average job placement. We consider a setting with many schools, students, and jobs, and show that if early contracting is impossible, the same, "balanced" amount of information is disclosed in essentially all equilibria. When early contracting is allowed and information arrives gradually, if schools disclose the balanced amount of information, students and employers will not find it profitable to contract early. If they disclose more, some students and employers will prefer to sign contracts before all information is revealed. (JEL C78, D82, D83)

Suggested Citation

  • Michael Ostrovsky & Michael Schwarz, 2010. "Information Disclosure and Unraveling in Matching Markets," American Economic Journal: Microeconomics, American Economic Association, vol. 2(2), pages 34-63, May.
  • Handle: RePEc:aea:aejmic:v:2:y:2010:i:2:p:34-63
    Note: DOI: 10.1257/mic.2.2.34
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    References listed on IDEAS

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    Cited by:

    1. Emir Kamenica & Matthew Gentzkow, 2011. "Bayesian Persuasion," American Economic Review, American Economic Association, vol. 101(6), pages 2590-2615, October.
    2. Raphael Boleslavsky & Christopher Cotton, 2012. "Grade Inflation and Education Quality," Working Papers 2012-2, University of Miami, Department of Economics.
    3. Benndorf, Volker & Kübler, Dorothea & Normann, Hans-Theo, 2015. "Privacy concerns, voluntary disclosure of information, and unraveling: An experiment," European Economic Review, Elsevier, vol. 75(C), pages 43-59.
    4. Hedlund, Jonas, 2017. "Bayesian persuasion by a privately informed sender," Journal of Economic Theory, Elsevier, vol. 167(C), pages 229-268.
    5. Goldstein, Itay & Leitner, Yaron, 2015. "Stress tests and information disclosure," Working Papers 15-10, Federal Reserve Bank of Philadelphia, revised 16 Nov 2015.
    6. Dirk Bergemann & Stephen Morris, 2017. "Information Design: A Unified Perspective," Working Papers 089_2017, Princeton University, Department of Economics, Econometric Research Program..
    7. Alexey Kushnir & Alexandru Nichifor, 2014. "Targeted vs. collective information sharing in networks," ECON - Working Papers 152, Department of Economics - University of Zurich.
    8. George J. Mailath & Andrew Postlewaite & Larry Samuelson, 2017. "Premuneration Values and Investments in Matching Markets," Economic Journal, Royal Economic Society, vol. 127(604), pages 2041-2065, September.
    9. Jens Gudmundsson, 2014. "Sequences in Pairing Problems: A new approach to reconcile stability with strategy-proofness for elementary matching problems," 2014 Papers pgu351, Job Market Papers.
    10. Bilancini, Ennio & Boncinelli, Leonardo, 2013. "Disclosure of information in matching markets with non-transferable utility," Games and Economic Behavior, Elsevier, vol. 82(C), pages 143-156.
    11. Xinyan Shi, 2013. "Information disclosure and vaccination externalities," International Journal of Economic Theory, The International Society for Economic Theory, vol. 9(3), pages 229-243, September.
    12. Sergey V. Popov & Dan Bernhardt, 2013. "University Competition, Grading Standards, And Grade Inflation," Economic Inquiry, Western Economic Association International, vol. 51(3), pages 1764-1778, July.
    13. Andrew F. Daughety & Jennifer F. Reinganum, 2010. "Public Goods, Social Pressure, and the Choice between Privacy and Publicity," American Economic Journal: Microeconomics, American Economic Association, vol. 2(2), pages 191-221, May.
    14. Martin Szydlowski & Briana Chang, 2017. "The Market for Conflicted Advice," 2017 Meeting Papers 133, Society for Economic Dynamics.
    15. Anton Kolotilin, 2013. "Optimal Information Disclosure: Quantity vs. Quality," Discussion Papers 2013-19, School of Economics, The University of New South Wales.
    16. Olivier Bos & Martin Ranger, 2018. "Risk and Unraveling in Labor Markets," Annals of Economics and Statistics, GENES, issue 129, pages 127-144.
    17. Ehlers, Tim & Schwager, Robert, 2012. "Honest Grading, Grade Inflation and Reputation," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62051, Verein für Socialpolitik / German Economic Association.
    18. repec:eee:gamebe:v:104:y:2017:i:c:p:632-655 is not listed on IDEAS
    19. Mailath, George J. & Postlewaite, Andrew & Samuelson, Larry, 2013. "Pricing and investments in matching markets," Theoretical Economics, Econometric Society, vol. 8(2), May.
    20. Schwager, Robert, 2013. "Majority Vote on Educational Standards," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79971, Verein für Socialpolitik / German Economic Association.
    21. Fainmesser, Itay P., 2013. "Social networks and unraveling in labor markets," Journal of Economic Theory, Elsevier, vol. 148(1), pages 64-103.
    22. Romanyuk, Gleb & Smolin, Alexey, 2018. "Cream Skimming and Information Design in Marching Markets," MPRA Paper 86713, University Library of Munich, Germany.
    23. Rick Harbaugh & Eric Rasmusen, 2012. "Coarse Grades: Informing the Public by Withholding Information," Working Papers 2012-06, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    24. Sandro Ambuehl & Vivienne Groves, 2017. "Unraveling Over Time," CESifo Working Paper Series 6739, CESifo Group Munich.

    More about this item

    JEL classification:

    • 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
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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