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Unraveling in Matching Markets

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Author Info
Li, Hao
Rosen, Sherwin

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Abstract

The authors use a two-period matching model with initial uncertainty about productivities of participants to analyze incentives for early contracting or unraveling. Unraveling provides insurance in the absence of complete markets but causes inefficient assignments. Unraveling is more likely the smaller the applicant pool, the smaller the proportion of more-promising applicants, and the greater the heterogeneity in the pool. Banning early contracts hurts firms and benefits less-promising applicants; the effects on more-promising applicants depend on how the gains from early contracts are shared. Ex post buyouts eliminate inefficient assignments and more-promising applicants always unravel. Copyright 1998 by American Economic Association.

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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 88 (1998)
Issue (Month): 3 (June)
Pages: 371-87
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Handle: RePEc:aea:aecrev:v:88:y:1998:i:3:p:371-87

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  2. Frederick Chen, 2003. "Unraveling in a dynamic matching market with Nash bargaining," Economics Bulletin, Economics Bulletin, vol. 3(17), pages 1-6. [Downloadable!]
  3. Jens Josephson & Joel Shapiro, 2008. "Interviews and Adverse Selection," Economics Working Papers 1093, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
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  4. Hanna W. Halaburda, 2008. "Unravelling in Two-Sided Matching Markets and Similarity of Preferences," Harvard Business School Working Papers 09-068, Harvard Business School. [Downloadable!]
  5. Christopher Avery & Christine Jolls & Richard Posner & Alvin E. Roth, 2007. "The New Market for Federal Judicial Law Clerks," NBER Working Papers 13213, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Muriel Niederle & Alvin E. Roth, 2007. "The Effects of a Centralized Clearinghouse on Job Placement, Wages, and Hiring Practices," NBER Chapters, in: Studies of Labor Market Intermediation National Bureau of Economic Research, Inc. [Downloadable!]
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  7. C. Nicholas McKinney & Muriel Niederle & Alvin E. Roth, 2003. "The collapse of a medical clearinghouse (and why such failures are rare)," NBER Working Papers 9467, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Ayşe Mumcu & Ismail Saglam, 2009. "Games of capacity allocation in many-to-one matching with an aftermarket," Social Choice and Welfare, Springer, vol. 33(3), pages 383-403, September. [Downloadable!] (restricted)
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  9. Alvin Roth, 2008. "Deferred acceptance algorithms: history, theory, practice, and open questions," International Journal of Game Theory, Springer, vol. 36(3), pages 537-569, March. [Downloadable!] (restricted)
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  10. C. Nicholas McKinney & Muriel Niederle & Alvin E. Roth, 2005. "The Collapse of a Medical Labor Clearinghouse (and Why Such Failures Are Rare)," American Economic Review, American Economic Association, vol. 95(3), pages 878-889, June. [Downloadable!]
  11. Michael Ostrovsky & Michael Schwarz, 2008. "Information Disclosure and Unraveling in Matching Markets," NBER Working Papers 13766, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Muriel Niederle & Alvin E Roth, 2003. "Unraveling reduces the scope of an entry level labor market: Gastroenterology with and without a centralized match," Levine's Bibliography 506439000000000428, UCLA Department of Economics. [Downloadable!]
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  13. Ettore Damiano & Hao Li, 2004. "Unraveling of Dynamic Sorting," Econometric Society 2004 Latin American Meetings 72, Econometric Society. [Downloadable!]
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  15. Ernan Haruvy & Alvin E. Roth & M. Utku Unver, 2004. "The Dynamics of Law Clerk Matching: An Experimental and Computational Investigation of Proposals for Reform of the Market," Experimental 0404001, EconWPA. [Downloadable!]
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  16. Muriel Niederle & Alvin E. Roth & M. Utku Ãœnver, 2009. "Unraveling Results from Comparable Demand and Supply: An Experimental Investigation," NBER Working Papers 15006, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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