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Truncation in the Matching Markets and Market Ineffciency

  • Janine Balter
  • Michela Rancan
  • Olena Senyuta

In this paper, we study the Ph.D academic job market. Based on the Gale and Shapley algorithm, we analyse whether a social planner can improve market efficiency by truncation, i.e., exogenously imposing a limit on the number of possible applications. Using simulations, we derive the optimal truncation level which balances the trade-off between being unmatched and gaining a better match in the aggregate. When graduates apply to their most preferred positions, we find that aggregate efficiency can be improved by limiting the number of applications. In particular, the limit can be considerable if the graduates' preferences over the positions are not very correlated. The derived limit is still the best one when graduates respond strategically (applying to universities which are at least individually most preferred at the expenses of those most preferred commonly) in a conservative sense: given the strategic behaviour of the graduates, the market efficiency can be further improved by choosing an even lower limit on the number of applications. Overall, this paper suggests a direction to improve the matching market for Ph.D. candidates by improving the quality of their matches and lowering the hiring costs for universities.

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File URL: http://hdl.handle.net/1814/29520
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Paper provided by European University Institute in its series RSCAS Working Papers with number 2014/04.

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Date of creation: Jan 2014
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Handle: RePEc:rsc:rsceui:2014/04
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  1. Damiano, Ettore & Li, Hao, 2005. "Price Discrimination and Efficient Matching," Microeconomics.ca working papers damiano-05-03-21-12-21-58, Vancouver School of Economics, revised 22 Mar 2005.
  2. Chen, Yan & Sonmez, Tayfun, 2006. "School choice: an experimental study," Journal of Economic Theory, Elsevier, vol. 127(1), pages 202-231, March.
  3. Flip Klijn & Joana Pais & Marc Vorsatz, 2010. "Preference Intensities and Risk Aversion in School Choice: A Laboratory Experiment," UFAE and IAE Working Papers 816.10, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  4. Christopher Avery & Jonathan Levin, 2009. "Early Admission at Selective Colleges," Discussion Papers 08-031, Stanford Institute for Economic Policy Research.
  5. Parag A. Pathak & Tayfun Sönmez, 2011. "School Admissions Reform in Chicago and England: Comparing Mechanisms by their Vulnerability to Manipulation," Boston College Working Papers in Economics 784, Boston College Department of Economics.
  6. Peter Coles & Ran Shorrer, 2013. "Optimal Truncation in Matching Markets," Working Papers 2013.49, Fondazione Eni Enrico Mattei.
  7. Braun, Sebastian & Dwenger, Nadja & Kübler, Dorothea, 2007. "Telling the Truth May Not Pay Off: An Empirical Study of Centralised University Admissions in Germany," IZA Discussion Papers 3261, Institute for the Study of Labor (IZA).
  8. Caterina Calsamiglia & Guillaume Haeringer & Flip Klijn, 2008. "Constrained School Choice: An Experimental Study," UFAE and IAE Working Papers 757.08, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  9. Coles, Peter Andrew & Levine, Phillip B. & Roth, Alvin E. & Cawley, John & Niederle, Muriel & Siegfried, John J., 2010. "The Job Market for New Economists: A Market Design Perspective," Scholarly Articles 5343168, Harvard University Department of Economics.
  10. Caldarelli, G. & Capocci, A., 2001. "Beauty and distance in the stable marriage problem," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 300(1), pages 325-331.
  11. James W. Boudreau & Vicki Knoblauch, 2010. "Marriage Matching and Intercorrelation of Preferences," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(3), pages 587-602, 06.
  12. 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.
  13. Peter Coles & Alexey Kushnir & Muriel Niederle, 2013. "Preference Signaling in Matching Markets," American Economic Journal: Microeconomics, American Economic Association, vol. 5(2), pages 99-134, May.
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