A Pigouvian Approach to Congestion in Matching Markets

Arbeitspapier

Recruiting agents, or "programs" costly screen “applicants” in matching processes, and congestion in a market increases with the number of applicants to be screened. To combat this externality that applicants impose on programs, application costs can be used as a Pigouvian tax. Higher costs reduce congestion by discouraging applicants from applying to certain programs; however, they may harm match quality. In a multiple-elicitation experiment conducted in a real-life matching market, we implement variants of the Gale-Shapley Deferred-Acceptance mechanism with different application costs. Our experimental and structural estimates show that a (low) application cost effectively reduces congestion without harming match quality.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 11967

Classification and Topics

• Classification: Wirtschaft ; Positive Analysis of Policy Formulation and Implementation ; Market Design ; General Equilibrium and Disequilibrium: General ; Allocative Efficiency; Cost-Benefit Analysis ; Analysis of Education
• Subject: Gale-Shapley Deferred Acceptance Mechanism ; costly preference formation ; screening ; stable matching ; congestion ; matching market place

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): He, Yinghua ; Magnac, Thierry
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/193261
• Last update: 10.03.2025, 11:45 AM CET