EITM: Matching: An Experimental Study

Regents Of The University Of Michigan - Ann Arbor, Ann Arbor MI

Investigators

Abstract

This project will use experimental and simulation methods to examine matching theories and their applications to school choice, labor markets, and marriage markets. When a public school district adopts "school choice", generally some schools attract many more applications than they can accept. How to match students to schools is therefore an important question for public policy. The experimental studies will focus on three algorithms that could be used to match students to schools. The first, the Boston mechanism, is one of the most commonly used and prominent in current use. There are two alternatives to the Boston mechanism that have superior theoretical properties - the Gale-Shapley mechanism and the top trading cycles mechanism. The goal is to evaluate which mechanism is likely to do a better job in the real world. The project will use lab experiments and extensive computer simulations to analyze both the basic school choice problem and the "controlled choice" problem when schools must meet goals for their enrollment characteristics (for example, including a certain percentage of low-income or minority students in their enrollment). Data from the experiment will provide the first rigorous evaluation of the Boston mechanism, as well as an evaluation of the Gale-Shapley mechanism and the top trading cycles mechanism used in the school choice context. As more states have passed legislation mandating intra- or inter-district school choice, it is urgent to evaluate the Boston mechanism as well as alternative mechanisms in order to make meaningful policy recommendations. The results of this study will be immediately useful to policymakers. The rest of the project will conduct experimental studies of three mathematical models that have proven to be a useful tool in labor economics, macroeconomics and monetary theory. These are also "matching" models; they each consider a decentralized matching process with search frictions. The experimental studies will test whether the theoretical models are robust when the perfect rationality assumption is relaxed. They will also examine factors affecting equilibrium selection, as well as the effects of taxes and subsidies on search and matching in these models. The models have been used to predict how people match to available jobs and how people find marriage partners. The results of this part of the project should therefore improve our understanding of how taxes and subsidies will affect occupational and marriage choices.