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Tâtonnement in matching markets

Author

Listed:
  • Westkamp, Alexander

    (Department of Management, Economics and Social Sciences, University of Cologne)

Abstract

I study tâtonnement processes in a matching market without transfers. In each period, schools set cutoffs, i.e. the preference ranks of the least preferred students they are willing to admit, and students accept their most preferred offers. Cutoffs are adjusted on the basis of demand-supply imbalances. A school's adjustment from one period to the next is moderate if it is bounded by the most recently observed imbalance at that school. I show that for any period in which all schools adjust moderately, the sum of demand-supply imbalances across all schools weakly decreases. Moreover, if all schools always adjust moderately and there is a unique stable matching, then adjustments converge to a market clearing cutoff vector. If there is more than one stable matching, moderate adjustments may cycle indefinitely but the supremum and the infimum of all cutoff vectors observed along a cycle are both market clearing.

Suggested Citation

  • Westkamp, Alexander, 0. "Tâtonnement in matching markets," Theoretical Economics, Econometric Society.
    • Handle: RePEc:the:publsh:5850
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    More about this item

    Keywords

    Tâtonnement; matching without transfers; cutoffs; moderate adjustments; stable matchings; market clearing;
    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
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • I20 - Health, Education, and Welfare - - Education - - - General

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