Matching is the part of economics that deals with the question of who gets what, e.g. who gets which jobs, who goes to which university, who receives which organ or who marries whom. During the second part of the last century, many markets have been discovered to have failed in providing the necessary conditions for efficient matches. These market failures have partly evolved on ethical or institutional grounds, but are more generally attributed to congestion or coordination problems caused by the inability of the market to make it safe for participants to act on their private information. For this reason, a variety of allocation mechanisms have been developed and subsequently tested in field and laboratory experiments for possible implementation in real-world applications.
This work attempts at giving a condensed review of different matching mechanisms and the performance of algorithms that have been implemented for solving the problems in their respective environments. The theoretical properties of these mechanisms as described in the increasingly vast literature on matching design will be used as a benchmark to compare their relative performance in terms of overall efficiency. The results yield some basic insights in the varying success of the competing algorithms in practice, indicating that both the quality of theoretical predictions and the actual performance of the algorithms decrease with the complexity of market environments. In particular, they show that imperfections of markets such as information asymmetry and incentive problems can have far-reaching consequences with respect to the effective working of matching procedures.
Inhaltsverzeichnis (Table of Contents)
- 1. INTRODUCTION
- 2. PRACTICAL PROBLEMS
- 2.1 Coordination and market failures
- 2.1.1 The labor market for medical interns
- 2.1.2 School choice
- 2.1.2.1 The New York City (NYC) High School Match
- 2.1.2.2 The Boston Public School Match (BPS)
- 2.2 Double coincidence of wants: kidney exchange
- 3. THEORETICAL FRAMEWORK
- 3.1 The marriage problem
- 3.1.1 A hypothetical model of the marriage market
- 3.1.2 Important matching properties
- 3.2 Gale-Shapley (GS) deferred-acceptance algorithm
- 3.2.1 A formal description of the assignment mechanism
- 3.2.2 Weak optimality of the GS stable matching algorithm
- 3.3 Alternative matching mechanisms
- 3.3.1 Top trading cycles mechanism
- 3.3.2 Priority mechanisms
- 3.3.3 Linear programming mechanism
- 4. INCENTIVES AND STRATEGIC BEHAVIOUR
- 4.1 Dominant strategies
- 4.1.1 Definitions and terminology
- 4.1.2 Stability and incentives
- 4.1.3 Strategy choice under incomplete information
- 4.2 Practical implications of stability and strategy-proofness
- 4.2.1 Relative performance of matching algorithms in laboratory experiments
- 4.2.2 Strategy-proofness of the Gale-Shapley algorithm: a fictitious example
- 5. CONCLUSIONS
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This thesis provides a condensed review of different matching mechanisms and the performance of algorithms used to solve matching problems. It uses theoretical properties from existing literature as a benchmark to compare the relative efficiency of these mechanisms in practice. The work aims to offer insights into the varying success of these algorithms, exploring how theoretical predictions and actual performance are affected by market complexity, information asymmetry, and incentive problems.
- Market failures in matching processes
- Analysis of various matching mechanisms (Gale-Shapley, Top Trading Cycles, etc.)
- Comparison of theoretical properties and practical performance of algorithms
- Impact of information asymmetry and incentives on matching efficiency
- Evaluation of matching algorithms in different real-world contexts (labor markets, school choice, kidney exchange)
Zusammenfassung der Kapitel (Chapter Summaries)
1. INTRODUCTION: This chapter introduces the concept of matching in markets, focusing on the allocation of scarce goods or individuals to institutions. It highlights the complexities of optimal allocation, especially when considering heterogeneous objects, varying preferences, and political or ethical constraints. The chapter emphasizes the limitations of monetary exchange in certain contexts (e.g., organ donation, school choice) and the resulting need for alternative allocation mechanisms. It introduces the concept of "double coincidence of wants" and three key categories of market failure: lack of thickness, congestion problems, and the inability to overcome information uncertainty. The chapter sets the stage for exploring different matching mechanisms and their efficacy in addressing these market failures.
2. PRACTICAL PROBLEMS: This chapter delves into real-world examples of market failures in matching, showcasing the challenges of efficient allocation in various settings. It examines specific case studies like the labor market for medical interns, the NYC and Boston public school matches, and kidney exchange. These examples illustrate the diverse contexts in which matching problems arise and the practical difficulties inherent in designing and implementing effective solutions. The chapter emphasizes the complexity of these real-world scenarios and provides a foundation for the theoretical frameworks discussed in subsequent chapters.
3. THEORETICAL FRAMEWORK: This chapter lays out the theoretical underpinnings of matching mechanisms, beginning with the "marriage problem" as a simplified model. It introduces the Gale-Shapley deferred-acceptance algorithm, detailing its formal description and its property of weak optimality. The chapter then explores alternative mechanisms such as the Top Trading Cycles mechanism and priority mechanisms, comparing their theoretical strengths and weaknesses. By establishing a solid theoretical base, this chapter prepares the groundwork for analyzing the practical applications and performance of these algorithms in later chapters.
4. INCENTIVES AND STRATEGIC BEHAVIOUR: This chapter investigates the influence of incentives and strategic behavior on the effectiveness of matching algorithms. It delves into the concepts of dominant strategies and stability, examining how information asymmetry and strategic choices impact the outcomes of matching processes. The chapter analyzes the relative performance of different algorithms in laboratory experiments and examines the strategy-proofness of the Gale-Shapley algorithm. By exploring the interplay between theoretical models and real-world behavior, this chapter adds a crucial layer of complexity to the analysis of matching mechanisms.
Schlüsselwörter (Keywords)
Matching mechanisms, market failures, Gale-Shapley algorithm, stable matching, strategy-proofness, incentives, information asymmetry, school choice, kidney exchange, labor markets, algorithm performance, theoretical framework, practical applications.
Frequently Asked Questions: A Comprehensive Language Preview of Matching Mechanisms
What is the main topic of this text?
This text provides a comprehensive overview of matching mechanisms, focusing on their theoretical properties and practical applications in various real-world scenarios. It analyzes different algorithms used to solve matching problems, comparing their theoretical efficiency with their actual performance in contexts like school choice, kidney exchange, and labor markets.
What are the key themes explored in this text?
The key themes include market failures in matching processes, the analysis of various matching mechanisms (Gale-Shapley, Top Trading Cycles, etc.), the comparison of theoretical properties and practical performance of algorithms, the impact of information asymmetry and incentives on matching efficiency, and the evaluation of matching algorithms in different real-world contexts.
What matching mechanisms are discussed?
The text discusses several matching mechanisms, prominently featuring the Gale-Shapley deferred-acceptance algorithm. Other mechanisms explored include the Top Trading Cycles mechanism and priority mechanisms. The text compares the theoretical strengths and weaknesses of each.
What real-world examples are used to illustrate matching problems?
Real-world examples include the labor market for medical interns, the New York City (NYC) and Boston Public School (BPS) matching systems, and kidney exchange. These examples demonstrate the diverse contexts in which matching problems occur and the challenges in designing effective solutions.
What is the Gale-Shapley algorithm, and what are its properties?
The Gale-Shapley algorithm is a deferred-acceptance algorithm used to find a stable matching. The text details its formal description and highlights its property of weak optimality. It also examines the algorithm's strategy-proofness and its performance in laboratory experiments.
How does the text address the impact of incentives and strategic behavior?
The text explores how incentives and strategic behavior influence the effectiveness of matching algorithms. It examines concepts like dominant strategies and stability, analyzing how information asymmetry and strategic choices affect the outcomes of matching processes. The relative performance of different algorithms under these conditions is also analyzed.
What are the main conclusions of the text?
The text concludes by summarizing the insights gained from comparing the theoretical properties and practical performance of various matching algorithms. It highlights the complexities introduced by market failures, information asymmetry, and strategic behavior in real-world matching problems.
What are the key chapters and their contents?
The text is structured into five chapters: 1. Introduction (setting the stage for matching problems), 2. Practical Problems (real-world examples of market failures), 3. Theoretical Framework (introduction of key algorithms and their properties), 4. Incentives and Strategic Behavior (impact of incentives on algorithm performance), and 5. Conclusions (summarizing key findings).
What are the keywords associated with this text?
Keywords include: Matching mechanisms, market failures, Gale-Shapley algorithm, stable matching, strategy-proofness, incentives, information asymmetry, school choice, kidney exchange, labor markets, algorithm performance, theoretical framework, practical applications.
- Quote paper
- Andreas Zweifel (Author), 2009, Matching mechanisms in theory and practice, Munich, GRIN Verlag, https://www.grin.com/document/147246
