Interdependent Values in Matching Markets: Evidence from Medical School Programs in Denmark

Benjamin Friedrich, Martin B. Hackmann, Adam Kapor, Sofia Moroni and Anne Brink Nandrup

No 32325, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper presents the first empirical evidence of interdependent values and strategic responses by market participants in a two-sided matching market. We consider the market for medical school programs in Denmark, which uses a centralized assignment mechanism. Leveraging unique administrative data and an information experiment, we show that students and rival programs hold payoff-relevant information that each program could use to admit students with higher persistence rates. Programs respond to these two sources of interdependent values, student self-selection and interdependent program values, by exhibiting ”home bias” towards local applicants. We construct and estimate a novel equilibrium model reflecting this evidence, and find that fully sharing information could significantly increase student persistence and program payoffs, but enabling students to communicate first preferences would leave outcomes unchanged. An alternative model assuming independent private values contradicts the empirical evidence, highlighting the importance of accounting for interdependent values in understanding and designing matching markets.

JEL-codes: D82 I21 L0 (search for similar items in EconPapers)
Date: 2024-04
New Economics Papers: this item is included in nep-des and nep-ure
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