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Decentralizing centralized matching markets: Implications from early offers in university admissions

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  • Grenet, Julien
  • He, Yinghua
  • Kübler, Dorothea

Abstract

The matching literature commonly rules out that market design itself shapes agent preferences. Underlying this premise is the assumption that agents know their own preferences at the outset and that preferences do not change throughout the matching process. Under this assumption, a centralized matching market can often outperform a decentralized one. Using a quasi-experiment in Germany's university admissions, we provide evidence against this assumption. We study a centralized clearinghouse that implements the early stages of the university-proposing Gale-Shapley deferred-acceptance mechanism in real time, resembling a decentralized market with continuous offers, rejections, and acceptances. With data on the exact timing of every decision, we show that early offers are more likely to be accepted than (potential) later offers, despite early offers not being made by more desirable universities. Furthermore, early offers are only accepted after some time rather than immediately. These results and direct survey evidence are consistent with a model of information acquisition: it is costly for students to learn about universities and accepting a university that turns out to be inferior causes regret. We discuss and rule out some alternative hypotheses. Our findings motivate a hybrid mechanism that balances centralization and decentralization. By allowing sequential learning, it improves welfare, especially in markets with substantial learning costs.

Suggested Citation

  • Grenet, Julien & He, Yinghua & Kübler, Dorothea, 2019. "Decentralizing centralized matching markets: Implications from early offers in university admissions," Discussion Papers, Research Unit: Market Behavior SP II 2019-208, WZB Berlin Social Science Center.
  • Handle: RePEc:zbw:wzbmbh:spii2019208
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    References listed on IDEAS

    as
    1. Braun, Sebastian & Dwenger, Nadja & Kübler, Dorothea & Westkamp, Alexander, 2014. "Implementing quotas in university admissions: An experimental analysis," Games and Economic Behavior, Elsevier, vol. 85(C), pages 232-251.
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    3. Hakimov, Rustamdjan & Kübler, Dorothea, 2019. "Experiments On Matching Markets: A Survey," Rationality and Competition Discussion Paper Series 153, CRC TRR 190 Rationality and Competition.
    4. Gabrielle Fack & Julien Grenet & Yinghua He, 2019. "Beyond Truth-Telling: Preference Estimation with Centralized School Choice and College Admissions," American Economic Review, American Economic Association, vol. 109(4), pages 1486-1529, April.
    5. Atila Abdulkadiroglu & Parag A. Pathak & Alvin E. Roth, 2009. "Strategy-proofness versus Efficiency in Matching with Indifferences: Redesigning the New York City High School Match," NBER Working Papers 14864, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    Centralized Matching Market; Gale-Shapley Deferred Acceptance Mechanism; University Admissions; Early Offers; Information Acquisition;

    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
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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