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What Pareto-Efficiency Adjustments Cannot Fix

Author

Listed:
  • Josué Ortega
  • Gabriel Ziegler
  • R. Pablo Arribillaga
  • Geng Zhao

Abstract

The Deferred Acceptance (DA) algorithm is stable and strategy-proof, but can produce matchings that are Pareto-inefficient for students, and thus several alternatives have been proposed to correct this inefficiency that only involve consented priority violations. However, we show that these approaches cannot correct DA’s suboptimal rank distribution, because this shortcoming can arise even in cases where DA is Pareto-efficient. We also examine student segregation in settings with tiered priority structures. We prove that the demographic composition of every school is perfectly preserved under any Pareto-efficient rule that dominates DA, and consequently fully segregated schools under DA maintain their extreme homogeneity.

Suggested Citation

  • Josué Ortega & Gabriel Ziegler & R. Pablo Arribillaga & Geng Zhao, 2026. "What Pareto-Efficiency Adjustments Cannot Fix," Berlin School of Economics Discussion Papers 0089, Berlin School of Economics.
    • Handle: RePEc:bdp:dpaper:0089
    DOI: 10.48462/opus4-6033
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    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

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