Truncation in the Matching Markets and Market Inefficiency

46 Pages Posted: 11 Feb 2014

See all articles by Janine Balter

Janine Balter

European University Institute

Michela Rancan

Polytechnic University of Marche

Olena Senyuta

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute)

Date Written: January 2014

Abstract

In this paper, we study the Ph.D academic job market. Based on the Gale and Shapley algorithm, we analyse whether a social planner can improve market efficiency by truncation, i.e., exogenously imposing a limit on the number of possible applications. Using simulations, we derive the optimal truncation level which balances the trade-off between being unmatched and gaining a better match in the aggregate. When graduates apply to their most preferred positions, we find that aggregate efficiency can be improved by limiting the number of applications. In particular, the limit can be considerable if the graduates' preferences over the positions are not very correlated. The derived limit is still the best one when graduates respond strategically (applying to universities which are at least individually most preferred at the expenses of those most preferred commonly) in a conservative sense: given the strategic behaviour of the graduates, the market efficiency can be further improved by choosing an even lower limit on the number of applications. Overall, this paper suggests a direction to improve the matching market for Ph.D. candidates by improving the quality of their matches and lowering the hiring costs for universities.

Keywords: Matching markets, Truncation, Gale-Shapley deferred acceptance algorithm, Preference misrepresentation

Suggested Citation

Balter, Janine and Rancan, Michela and Senyuta, Olena, Truncation in the Matching Markets and Market Inefficiency (January 2014). Robert Schuman Centre for Advanced Studies Research Paper No. 2014/07, Available at SSRN: https://ssrn.com/abstract=2393322 or http://dx.doi.org/10.2139/ssrn.2393322

Janine Balter (Contact Author)

European University Institute ( email )

Fiesole, Tuscany
Italy

Michela Rancan

Polytechnic University of Marche ( email )

Piazzale Martelli 8
Ancona, 18039
Italy

Olena Senyuta

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute) ( email )

P.O. Box 882
7 Politickych veznu
Prague 1, 111 21
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
23
Abstract Views
467
PlumX Metrics