A Pigouvian Approach to Congestion in Matching Markets
Yinghua He and
Thierry Magnac ()
No 11967, IZA Discussion Papers from Institute of Labor Economics (IZA)
Recruiting agents, or "programs" costly screen “applicants” in matching processes, and congestion in a market increases with the number of applicants to be screened. To combat this externality that applicants impose on programs, application costs can be used as a Pigouvian tax. 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 place (search for similar items in EconPapers)
JEL-codes: D78 D47 D50 D61 I21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-des, nep-exp and nep-gth
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