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Strategic disaggregation in matching markets

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  • Nei, Stephen
  • Pakzad-Hurson, Bobak

Abstract

Decisions agents make before and after matching can be strategically linked through the match. We demonstrate this linkage in a game where universities either require students to commit to majors before matriculating or allow students to pick majors during their studies. The interaction between “matching forces” (competition for higher quality students) and “principal-agent forces” (moral hazard and adverse selection) leads to two equilibria that mirror the admissions systems in the US and England. With monetary transfers, our model provides insights into athletic scholarships. Payment caps that restrict transfers to potential athletes who decide not to play sports can maximize welfare.

Suggested Citation

  • Nei, Stephen & Pakzad-Hurson, Bobak, 2021. "Strategic disaggregation in matching markets," Journal of Economic Theory, Elsevier, vol. 197(C).
    • Handle: RePEc:eee:jetheo:v:197:y:2021:i:c:s0022053121001460
    DOI: 10.1016/j.jet.2021.105329
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    Cited by:

    1. Zeky Murra-Anton, 2022. "Financial aid and early admissions at selective need-blind colleges," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 74(3), pages 833-870, October.

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    More about this item

    Keywords

    Matching with contracts; College admissions; Athletic scholarships;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions

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