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Unravelling in Two-Sided Matching Markets and Similarity of Preferences

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  • Hanna W. Halaburda

    () (Harvard Business School, Strategy Unit)

Abstract

This paper investigates the causes and welfare consequences of unravelling in two-sided matching markets. It shows that similarity of preferences is an important factor driving unravelling. In particular, it shows that under the ex-post stable mechanism (the mechanism that the literature focuses on), unravelling is more likely to occur when participants have more similar preferences. It also shows that any Pareto-optimal mechanism must prevent unravelling, and that the ex-post stable mechanism is Pareto-optimal if and only if it prevents unravelling.

Suggested Citation

  • Hanna W. Halaburda, 2008. "Unravelling in Two-Sided Matching Markets and Similarity of Preferences," Harvard Business School Working Papers 09-068, Harvard Business School.
  • Handle: RePEc:hbs:wpaper:09-068
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    References listed on IDEAS

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    1. Li, Hao & Rosen, Sherwin, 1998. "Unraveling in Matching Markets," American Economic Review, American Economic Association, vol. 88(3), pages 371-387, June.
    2. Jeremy Bulow & Jonathan Levin, 2006. "Matching and Price Competition," American Economic Review, American Economic Association, vol. 96(3), pages 652-668, June.
    3. Muriel Niederle & Alvin E. Roth, 2004. "Market Culture: How Norms Governing Exploding Offers Affect Market Performance," Levine's Bibliography 122247000000000018, UCLA Department of Economics.
    4. Roth, Alvin E & Xing, Xiaolin, 1997. "Turnaround Time and Bottlenecks in Market Clearing: Decentralized Matching in the Market for Clinical Psychologists," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 284-329, April.
    5. C. Nicholas McKinney & Muriel Niederle & Alvin E. Roth, 2005. "The Collapse of a Medical Labor Clearinghouse (and Why Such Failures Are Rare)," American Economic Review, American Economic Association, vol. 95(3), pages 878-889, June.
    6. Ettore Damiano & Hao Li & Wing Suen, 2005. "Unravelling of Dynamic Sorting," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 1057-1076.
    7. Muriel Niederle & Alvin E. Roth, 2003. "Unraveling Reduces Mobility in a Labor Market: Gastroenterology with and without a Centralized Match," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1342-1352, December.
    8. Roth,Alvin E. & Sotomayor,Marilda A. Oliveira, 1992. "Two-Sided Matching," Cambridge Books, Cambridge University Press, number 9780521437882, May.
    9. Ettore Damiano & Hao Li, 2004. "Unraveling of Dynamic Sorting," Econometric Society 2004 Latin American Meetings 72, Econometric Society.
    10. Alvin E Roth & Richard A Posner & Christine Jolls & Christopher Avery, 2007. "The New Market for Federal Judicial Law Clerks," Levine's Bibliography 843644000000000288, UCLA Department of Economics.
    11. Roth, Alvin E, 1984. "The Evolution of the Labor Market for Medical Interns and Residents: A Case Study in Game Theory," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 991-1016, December.
    12. Roth, Alvin E & Xing, Xiaolin, 1994. "Jumping the Gun: Imperfections and Institutions Related to the Timing of Market Transactions," American Economic Review, American Economic Association, vol. 84(4), pages 992-1044, September.
    13. Haruvy, Ernan & Roth, Alvin E. & Unver, M. Utku, 2006. "The dynamics of law clerk matching: An experimental and computational investigation of proposals for reform of the market," Journal of Economic Dynamics and Control, Elsevier, vol. 30(3), pages 457-486, March.
    14. Hao Li & Wing Suen, 2000. "Risk Sharing, Sorting, and Early Contracting," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 1058-1087, October.
    15. John H. Kagel & Alvin E. Roth, 2000. "The Dynamics of Reorganization in Matching Markets: A Laboratory Experiment Motivated by a Natural Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 115(1), pages 201-235.
    16. Roth, Alvin E, 1991. "A Natural Experiment in the Organization of Entry-Level Labor Markets: Regional Markets for New Physicians and Surgeons in the United Kingdom," American Economic Review, American Economic Association, vol. 81(3), pages 415-440, June.
    17. C. Nicholas McKinney & Muriel Niederle & Alvin E. Roth, 2003. "The collapse of a medical clearinghouse (and why such failures are rare)," NBER Working Papers 9467, National Bureau of Economic Research, Inc.
    18. Mongell, Susan & Roth, Alvin E, 1991. "Sorority Rush as a Two-Sided Matching Mechanism," American Economic Review, American Economic Association, vol. 81(3), pages 441-464, June.
    19. Alvin E. Roth & Uriel G. Rothblum, 1999. "Truncation Strategies in Matching Markets--In Search of Advice for Participants," Econometrica, Econometric Society, vol. 67(1), pages 21-44, January.
    20. Posner, Richard A. & Avery, Christopher & Jolls, Christine & Roth, Alvin, 2001. "The Market for Federal Judicial Law Clerks," Scholarly Articles 2623748, Harvard University Department of Economics.
    21. Ehlers, Lars & Masso, Jordi, 2007. "Incomplete information and singleton cores in matching markets," Journal of Economic Theory, Elsevier, vol. 136(1), pages 587-600, September.
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    Citations

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    Cited by:

    1. Bos, Olivier & Ranger, Martin, 2016. "Risk and Unraveling in Labor Markets," MPRA Paper 74785, University Library of Munich, Germany.
    2. Muriel Niederle & Alvin E. Roth, 2009. "The Effects of a Centralized Clearinghouse on Job Placement, Wages, and Hiring Practices," NBER Chapters,in: Studies of Labor Market Intermediation, pages 235-271 National Bureau of Economic Research, Inc.
    3. Fainmesser, Itay P., 2013. "Social networks and unraveling in labor markets," Journal of Economic Theory, Elsevier, vol. 148(1), pages 64-103.
    4. Boudreau, James W. & Knoblauch, Vicki, 2014. "What price stability? Social welfare in matching markets," Mathematical Social Sciences, Elsevier, vol. 67(C), pages 27-33.
    5. Burak Can & Ali Ihsan Ozkes & Ton Storcken, 2017. "Generalized Measures of Polarization in Preferences," AMSE Working Papers 1734, Aix-Marseille School of Economics, Marseille, France.
    6. Echenique, Federico & Pereyra, Juan Sebastián, 2016. "Strategic complementarities and unraveling in matching markets," Theoretical Economics, Econometric Society, vol. 11(1), January.
    7. Alvin E. Roth, 2012. "Marketplace Institutions Related to the Timing of Transactions: Reply to Priest," Journal of Labor Economics, University of Chicago Press, vol. 30(2), pages 479-494.
    8. Alvin E. Roth, 2010. "Marketplace Institutions Related to the Timing of Transactions," NBER Working Papers 16556, National Bureau of Economic Research, Inc.
    9. James Boudreau & Vicki Knoblauch, 2013. "Preferences and the price of stability in matching markets," Theory and Decision, Springer, vol. 74(4), pages 565-589, April.
    10. Muriel Niederle & Alvin E. Roth & M. Utku Ünver, 2013. "Unraveling Results from Comparable Demand and Supply: An Experimental Investigation," Games, MDPI, Open Access Journal, vol. 4(2), pages 1-40, June.
    11. Mustafa Afacan, 2013. "The welfare effects of pre-arrangements in matching markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 53(1), pages 139-151, May.
    12. Bolle, Friedel & Breitmoser, Yves & Otto, Philipp E., 2011. "A positive theory of cooperative games: The logit core and its variants," MPRA Paper 32918, University Library of Munich, Germany.
    13. Sandro Ambuehl & Vivienne Groves, 2017. "Unraveling Over Time," CESifo Working Paper Series 6739, CESifo Group Munich.

    More about this item

    Keywords

    two-sided matching; unravelling; similarity of preferences;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • 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

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