IDEAS home Printed from https://ideas.repec.org/a/ucp/jpolec/doi10.1086-687476.html
   My bibliography  Save this article

A Supply and Demand Framework for Two-Sided Matching Markets

Author

Listed:
  • Eduardo M. Azevedo
  • Jacob D. Leshno

Abstract

This paper develops a price-theoretic framework for matching markets with heterogeneous preferences. The model departs from the Gale and Shapley model by assuming that a finite number of agents on one side (colleges) are matched to a continuum of agents on the other side (students). We show that stable matchings correspond to solutions of supply and demand equations, with the selectivity of each college playing a role similar to that of prices. We apply the model to an analysis of how competition induced by school choice gives schools incentives to invest in quality and to asymptotics of school choice mechanisms.

Suggested Citation

  • Eduardo M. Azevedo & Jacob D. Leshno, 2016. "A Supply and Demand Framework for Two-Sided Matching Markets," Journal of Political Economy, University of Chicago Press, vol. 124(5), pages 1235-1268.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/687476
    DOI: 10.1086/687476
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1086/687476
    Download Restriction: Access to the online full text or PDF requires a subscription.
    File URL: http://dx.doi.org/10.1086/687476
    Download Restriction: Access to the online full text or PDF requires a subscription.
    File URL: https://libkey.io/10.1086/687476?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64(5), pages 416-416.
    2. Xavier Gabaix & Augustin Landier, 2008. "Why has CEO Pay Increased So Much?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(1), pages 49-100.
    3. Soohyung Lee & Muriel Niederle, 2015. "Propose with a rose? Signaling in internet dating markets," Experimental Economics, Springer;Economic Science Association, vol. 18(4), pages 731-755, December.
    4. Atila Abdulkadiro?lu & Yeon-Koo Che & Yosuke Yasuda, 2015. "Expanding "Choice" in School Choice," American Economic Journal: Microeconomics, American Economic Association, vol. 7(1), pages 1-42, February.
    5. repec:hal:spmain:info:hdl:2441/5kmb4ke32h9ur9159sab6hvkck is not listed on IDEAS
    6. Atila Abdulkadiroglu & Tayfun Sönmez, 2003. "School Choice: A Mechanism Design Approach," American Economic Review, American Economic Association, vol. 93(3), pages 729-747, June.
    7. repec:oup:restud:v:84:y::i:1:p:444-463. is not listed on IDEAS
    8. Marko Tervio, 2008. "The Difference That CEOs Make: An Assignment Model Approach," American Economic Review, American Economic Association, vol. 98(3), pages 642-668, June.
    9. Raleigh, 2008. "Aashe 2008," Journal of Education for Sustainable Development, , vol. 2(2), pages 99-100, September.
    10. Tayfun Sönmez & M. Utku Ünver, 2010. "Course Bidding At Business Schools," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(1), pages 99-123, February.
    11. Bogomolnaia, Anna & Moulin, Herve, 2001. "A New Solution to the Random Assignment Problem," Journal of Economic Theory, Elsevier, vol. 100(2), pages 295-328, October.
    12. Peter Coles & Alexey Kushnir & Muriel Niederle, 2013. "Preference Signaling in Matching Markets," American Economic Journal: Microeconomics, American Economic Association, vol. 5(2), pages 99-134, May.
    13. Will Dobbie & Roland G. Fryer Jr., 2014. "The Impact of Attending a School with High-Achieving Peers: Evidence from the New York City Exam Schools," American Economic Journal: Applied Economics, American Economic Association, vol. 6(3), pages 58-75, July.
    14. Gene M. Grossman, 2004. "The Distribution of Talent and the Pattern and Consequences of International Trade," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 209-239, February.
    15. Roth, Alvin E., 1985. "The college admissions problem is not equivalent to the marriage problem," Journal of Economic Theory, Elsevier, vol. 36(2), pages 277-288, August.
    16. Aytek Erdil & Haluk Ergin, 2008. "What's the Matter with Tie-Breaking? Improving Efficiency in School Choice," American Economic Review, American Economic Association, vol. 98(3), pages 669-689, June.
    17. Nikhil Agarwal & Paulo Somaini, 2018. "Demand Analysis Using Strategic Reports: An Application to a School Choice Mechanism," Econometrica, Econometric Society, vol. 86(2), pages 391-444, March.
    18. Atila Abdulkadiroğlu & Joshua Angrist & Parag Pathak, 2014. "The Elite Illusion: Achievement Effects at Boston and New York Exam Schools," Econometrica, Econometric Society, vol. 82(1), pages 137-196, January.
    19. Atila Abdulkadiroğlu & Parag A. Pathak & Alvin E. Roth & Tayfun Sönmez, 2005. "The Boston Public School Match," American Economic Review, American Economic Association, vol. 95(2), pages 368-371, May.
    20. Azevedo, Eduardo M., 2014. "Imperfect competition in two-sided matching markets," Games and Economic Behavior, Elsevier, vol. 83(C), pages 207-223.
    21. Balinski, Michel & Sonmez, Tayfun, 1999. "A Tale of Two Mechanisms: Student Placement," Journal of Economic Theory, Elsevier, vol. 84(1), pages 73-94, January.
    22. Roth, Alvin E & Sotomayor, Marilda, 1989. "The College Admissions Problem Revisited," Econometrica, Econometric Society, vol. 57(3), pages 559-570, May.
    23. Fuhito Kojima & Parag A. Pathak, 2009. "Incentives and Stability in Large Two-Sided Matching Markets," American Economic Review, American Economic Association, vol. 99(3), pages 608-627, June.
    24. Becker, Gary S, 1973. "A Theory of Marriage: Part I," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 813-846, July-Aug..
    25. Segal, Ilya, 2007. "The communication requirements of social choice rules and supporting budget sets," Journal of Economic Theory, Elsevier, vol. 136(1), pages 341-378, September.
    26. Elliott Peranson & Alvin E. Roth, 1999. "The Redesign of the Matching Market for American Physicians: Some Engineering Aspects of Economic Design," American Economic Review, American Economic Association, vol. 89(4), pages 748-780, September.
    27. Varian, Hal R, 1975. "A Third Remark on the Number of Equilibria of an Economy," Econometrica, Econometric Society, vol. 43(5-6), pages 985-986, Sept.-Nov.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kojima, Fuhito, 2013. "Efficient resource allocation under multi-unit demand," Games and Economic Behavior, Elsevier, vol. 82(C), pages 1-14.
    2. Alvin Roth, 2008. "Deferred acceptance algorithms: history, theory, practice, and open questions," International Journal of Game Theory, Springer;Game Theory Society, vol. 36(3), pages 537-569, March.
    3. Eric Budish & Estelle Cantillon, 2012. "The Multi-unit Assignment Problem: Theory and Evidence from Course Allocation at Harvard," American Economic Review, American Economic Association, vol. 102(5), pages 2237-2271, August.
    4. Atila Abdulkadiroglu & Parag A. Pathak & Alvin E. Roth, 2009. "Strategy-Proofness versus Efficiency in Matching with Indifferences: Redesigning the NYC High School Match," American Economic Review, American Economic Association, vol. 99(5), pages 1954-1978, December.
    5. Yusuke Narita, 2020. "A Theory of Quasi-Experimental Evaluation of School Quality," Working Papers 2020-085, Human Capital and Economic Opportunity Working Group.
    6. Hatfield, John William & Kojima, Fuhito & Narita, Yusuke, 2016. "Improving schools through school choice: A market design approach," Journal of Economic Theory, Elsevier, vol. 166(C), pages 186-211.
    7. Atila Abdulkadiroğlu & Nikhil Agarwal & Parag A. Pathak, 2015. "The Welfare Effects of Coordinated Assignment: Evidence from the NYC HS Match," NBER Working Papers 21046, National Bureau of Economic Research, Inc.
    8. Dur, Umut & Pathak, Parag A. & Sönmez, Tayfun, 2020. "Explicit vs. statistical targeting in affirmative action: Theory and evidence from Chicago's exam schools," Journal of Economic Theory, Elsevier, vol. 187(C).
    9. Scott Duke Kominers & Alexander Teytelboym & Vincent P Crawford, 2017. "An invitation to market design," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 33(4), pages 541-571.
    10. Ehlers, Lars & Hafalir, Isa E. & Yenmez, M. Bumin & Yildirim, Muhammed A., 2014. "School choice with controlled choice constraints: Hard bounds versus soft bounds," Journal of Economic Theory, Elsevier, vol. 153(C), pages 648-683.
    11. Alvin E. Roth, 2010. "Marketplace Institutions Related to the Timing of Transactions," NBER Working Papers 16556, National Bureau of Economic Research, Inc.
    12. Haeringer, Guillaume & Klijn, Flip, 2009. "Constrained school choice," Journal of Economic Theory, Elsevier, vol. 144(5), pages 1921-1947, September.
    13. Kesten, Onur & Unver, Utku, 2015. "A theory of school choice lotteries," Theoretical Economics, Econometric Society, vol. 10(2), May.
    14. Alvin E. Roth, 2012. "Marketplace Institutions Related to the Timing of Transactions: Reply to Priest," Journal of Labor Economics, University of Chicago Press, vol. 30(2), pages 479-494.
    15. Alvin E. Roth, 2009. "What Have We Learned from Market Design?," Innovation Policy and the Economy, University of Chicago Press, vol. 9(1), pages 79-112.
    16. EHLERS, Lars, 2010. "School Choice with Control," Cahiers de recherche 2010-05, Universite de Montreal, Departement de sciences economiques.
    17. John William Hatfield & Fuhito Kojima & Yusuke Narita, 2011. "Promoting School Competition Through School Choice: A Market Design Approach," Working Papers 2011-018, Human Capital and Economic Opportunity Working Group.
    18. Fuhito Kojima & Parag A. Pathak, 2009. "Incentives and Stability in Large Two-Sided Matching Markets," American Economic Review, American Economic Association, vol. 99(3), pages 608-627, June.
    19. Kojima, Fuhito & Manea, Mihai, 2010. "Incentives in the probabilistic serial mechanism," Journal of Economic Theory, Elsevier, vol. 145(1), pages 106-123, January.
    20. Atila Abdulkadiro?lu & Yeon-Koo Che & Yosuke Yasuda, 2015. "Expanding "Choice" in School Choice," American Economic Journal: Microeconomics, American Economic Association, vol. 7(1), pages 1-42, February.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ucp:jpolec:doi:10.1086/687476. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Journals Division (email available below). General contact details of provider: https://www.journals.uchicago.edu/JPE .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.