Working Paper: CEPR ID: DP15082
Authors: Thierry Magnac; Yinghua He
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; D47; D50; D61; I21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher application costs (G19) | Reduce congestion (L91) |
| Low application cost (G19) | Reduce congestion (L91) |
| Low application cost (G19) | No negative impact on match quality (L15) |
| High application cost (D29) | Lower match quality (C78) |
| High application cost (D29) | Larger number of blocking pairs (C78) |
| High application cost (D29) | Larger number of unmatched applicants (Y40) |