Working paper

Application Costs and Congestion in Matching Markets

Yinghua He, and Thierry Magnac

Abstract

A matching market often requires recruiting agents, or ``programs,'' to costly screen ``applicants,'' and congestion increases with the number of applicants to be screened. We investigate the role of application costs: 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.

Keywords

Gale-Shapley Deferred Acceptance Mechanism; Costly Preference Formation; Screening; Stable Matching; Congestion; Matching Market Design;

JEL codes

  • C78: Bargaining Theory • Matching Theory
  • D47: Market Design
  • D50: General
  • D61: Allocative Efficiency • Cost–Benefit Analysis
  • I21: Analysis of Education

Reference

Yinghua He, and Thierry Magnac, Application Costs and Congestion in Matching Markets, TSE Working Paper, n. 17-870, December 2017, revised February 2019.

See also

Published in

TSE Working Paper, n. 17-870, December 2017, revised February 2019