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Strategy-proof improvements upon deferred acceptance: A maximal domain for possibility

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  • Kesten, Onur
  • Kurino, Morimitsu

Abstract

In one-sided matching/assignment problems, an important debate centers around whether it is possible to improve upon the Gale-Shapley student-proposing deferred acceptance mechanism (DA) via alternative strategy-proof mechanisms. In unrestricted preference domains, no strategy-proof mechanism Pareto improves upon DA whether students have outside options or not. When standard exogenous outside options, e.g., private school, do not necessarily exist, we show that endogenous outside options, i.e., problem-specific schools that could always accept a deviating student, arise and the impossibility of obtaining a strategy-proof improvements over DA prevails. It is, however, possible to construct natural subdomains allowing for positive results, where some students' preferences are in part induced by an exogenous hierarchy of quality tiers. We then identify maximal domains on which it is possible to improve upon DA without sacrificing strategy-proofness. This result may help better assess the underpinnings of the three-way tension among efficiency, individual rationality/stability, and strategy-proofness in matching problems.

Suggested Citation

  • Kesten, Onur & Kurino, Morimitsu, 2019. "Strategy-proof improvements upon deferred acceptance: A maximal domain for possibility," Games and Economic Behavior, Elsevier, vol. 117(C), pages 120-143.
  • Handle: RePEc:eee:gamebe:v:117:y:2019:i:c:p:120-143
    DOI: 10.1016/j.geb.2019.05.010
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    More about this item

    Keywords

    Student-proposing deferred acceptance mechanism; Strategy-proofness; Pareto dominance; Outside options;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education

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