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Adaptive Priority Mechanisms

Author

Listed:
  • Oğuzhan Çelebi
  • Joel P. Flynn

Abstract

How should authorities that care about match quality and diversity allocate resources in the face of uncertainty? We introduce adaptive priority mechanisms (APM) that prioritize agents based on their scores and characteristics. We show that APM uniquely implement the ex post optimal allocation. The ubiquitous priority and quota mechanisms are optimal if and only if the authority is risk-neutral or extremely risk-averse over diversity, respectively. Deferred Acceptance implements the unique stable matching when all authorities use the optimal APM. We provide a practical roadmap for implementing APM as a market-design solution and illustrate this using Chicago Public Schools data.

Suggested Citation

  • Oğuzhan Çelebi & Joel P. Flynn, 2025. "Adaptive Priority Mechanisms," NBER Working Papers 34035, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:34035
    Note: ED
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    More about this item

    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
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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