Priority Design in Centralized Matching Markets

Oğuzhan Çelebi and Joel Flynn

The Review of Economic Studies, 2022, vol. 89, issue 3, 1245-1277

Abstract: In many centralized matching markets, agents’ property rights over objects are derived from a coarse transformation of an underlying score. Prominent examples include the distance-based system employed by Boston Public Schools, where students who lived within a certain radius of each school were prioritized over all others, and the income-based system used in New York public housing allocation, where eligibility is determined by a sharp income cutoff. Motivated by this, we study how to optimally coarsen an underlying score. Our main result is that, for any continuous objective function and under stable matching mechanisms, the optimal design can be attained by splitting agents into at most three indifference classes for each object. We provide insights into this design problem in three applications: distance-based scores in Boston Public Schools, test-based scores for Chicago exam schools, and income-based scores in New York public housing allocation.

Keywords: Matching theory; Market design; Priority design; Allocative efficiency; C78; D47; D61 (search for similar items in EconPapers)
Date: 2022
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