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Unraveling Results from Comparable Demand and Supply: An Experimental Investigation

Author

Listed:
  • Muriel Niederle

    (Stanford University)

  • Alvin E. Roth

    (Harvard University)

  • M. Utku Ünver

    (Boston College)

Abstract
Markets sometimes unravel, with offers becoming inefficiently early. Often this is attributed to competition arising from an imbalance of demand and supply, typically excess demand for workers. However this presents a puzzle, since unraveling can only occur when firms are willing to make early offers and workers are willing to accept them. We present a model and experiment in which workers’ quality becomes known only in the late part of the market. However, in equilibrium, matching can occur (inefficiently) early only when there is comparable demand and supply: a surplus of applicants, but a shortage of high quality applicants.

Suggested Citation

  • Muriel Niederle & Alvin E. Roth & M. Utku Ünver, 2008. "Unraveling Results from Comparable Demand and Supply: An Experimental Investigation," Boston College Working Papers in Economics 718, Boston College Department of Economics.
    • Handle: RePEc:boc:bocoec:718
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    References listed on IDEAS

    as
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    5. C. Nicholas McKinney & Muriel Niederle & Alvin E. Roth, 2005. "The Collapse of a Medical Labor Clearinghouse (and Why Such Failures Are Rare)," American Economic Review, American Economic Association, vol. 95(3), pages 878-889, June.
    6. Halaburda, Hanna, 2010. "Unravelling in two-sided matching markets and similarity of preferences," Games and Economic Behavior, Elsevier, vol. 69(2), pages 365-393, July.
    7. Ettore Damiano & Hao Li & Wing Suen, 2005. "Unravelling of Dynamic Sorting," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(4), pages 1057-1076.
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    9. Roth,Alvin E. & Sotomayor,Marilda A. Oliveira, 1992. "Two-Sided Matching," Cambridge Books, Cambridge University Press, number 9780521437882, September.
    10. Unver, M. Utku, 2001. "Backward unraveling over time: The evolution of strategic behavior in the entry level British medical labor markets," Journal of Economic Dynamics and Control, Elsevier, vol. 25(6-7), pages 1039-1080, June.
    11. Alvin E Roth & Richard A Posner & Christine Jolls & Christopher Avery, 2007. "The New Market for Federal Judicial Law Clerks," Levine's Bibliography 843644000000000288, UCLA Department of Economics.
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    13. Haruvy, Ernan & Utku Unver, M., 2007. "Equilibrium selection and the role of information in repeated matching markets," Economics Letters, Elsevier, vol. 94(2), pages 284-289, February.
    14. Haruvy, Ernan & Roth, Alvin E. & Unver, M. Utku, 2006. "The dynamics of law clerk matching: An experimental and computational investigation of proposals for reform of the market," Journal of Economic Dynamics and Control, Elsevier, vol. 30(3), pages 457-486, March.
    15. Muriel Niederle & Alvin E. Roth, 2005. "The Gastroenterology Fellowship Market: Should There Be a Match?," American Economic Review, American Economic Association, vol. 95(2), pages 372-375, May.
    16. Soohyung Lee, 2008. "Preferences and Choice Constraints in Marital Sorting: Evidence From Korea," Discussion Papers 07-042, Stanford Institute for Economic Policy Research.
    17. Alvin E. Roth & Axel Ockenfels, 2002. "Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet," American Economic Review, American Economic Association, vol. 92(4), pages 1093-1103, September.
    18. Muriel Niederle & Alvin E. Roth, 2009. "The Effects of a Centralized Clearinghouse on Job Placement, Wages, and Hiring Practices," NBER Chapters, in: Studies of Labor Market Intermediation, pages 235-271, National Bureau of Economic Research, Inc.
    19. Chen, Yan & Sonmez, Tayfun, 2006. "School choice: an experimental study," Journal of Economic Theory, Elsevier, vol. 127(1), pages 202-231, March.
    20. Fainmesser, Itay P., 2013. "Social networks and unraveling in labor markets," Journal of Economic Theory, Elsevier, vol. 148(1), pages 64-103.
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    23. Posner, Richard A. & Avery, Christopher & Jolls, Christine & Roth, Alvin, 2001. "The Market for Federal Judicial Law Clerks," Scholarly Articles 2623748, Harvard University Department of Economics.
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    25. M. Utku Ünver, 2005. "On the survival of some unstable two-sided matching mechanisms," International Journal of Game Theory, Springer;Game Theory Society, vol. 33(2), pages 239-254, June.
    26. Clayton Featherstone & Muriel Niederle, 2008. "Ex Ante Efficiency in School Choice Mechanisms: An Experimental Investigation," NBER Working Papers 14618, National Bureau of Economic Research, Inc.
    27. Muriel Niederle & Alvin E. Roth, 2001. "Unraveling Reduces the Scope of an Entry Level Labor Market: Gastroenterology With and Without a Centralized Match," NBER Working Papers 8616, National Bureau of Economic Research, Inc.
    28. Guillaume R. Fréchette & Alvin E. Roth & M. Utku Ünver, 2007. "Unraveling yields inefficient matchings: evidence from post-season college football bowls," RAND Journal of Economics, RAND Corporation, vol. 38(4), pages 967-982, December.
    29. Ockenfels, Axel & Roth, Alvin E., 2006. "Late and multiple bidding in second price Internet auctions: Theory and evidence concerning different rules for ending an auction," Games and Economic Behavior, Elsevier, vol. 55(2), pages 297-320, May.
    30. Gunter J. Hitsch & Ali Hortaçsu & Dan Ariely, 2010. "Matching and Sorting in Online Dating," American Economic Review, American Economic Association, vol. 100(1), pages 130-163, March.
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    32. Federico Echenique & Alistair J. Wilson & Leeat Yariv, 2016. "Clearinghouses for two‐sided matching: An experimental study," Quantitative Economics, Econometric Society, vol. 7(2), pages 449-482, July.
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    34. John H. Kagel & Alvin E. Roth, 2000. "The Dynamics of Reorganization in Matching Markets: A Laboratory Experiment Motivated by a Natural Experiment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(1), pages 201-235.
    35. Roth, Alvin E, 1991. "A Natural Experiment in the Organization of Entry-Level Labor Markets: Regional Markets for New Physicians and Surgeons in the United Kingdom," American Economic Review, American Economic Association, vol. 81(3), pages 415-440, June.
    36. Nagel, Rosemarie, 1995. "Unraveling in Guessing Games: An Experimental Study," American Economic Review, American Economic Association, vol. 85(5), pages 1313-1326, December.
    37. Sonmez, Tayfun, 1999. "Can Pre-arranged Matches Be Avoided in Two-Sided Matching Markets?," Journal of Economic Theory, Elsevier, vol. 86(1), pages 148-156, May.
    38. Elliott Peranson & Alvin E. Roth, 1999. "The Redesign of the Matching Market for American Physicians: Some Engineering Aspects of Economic Design," American Economic Review, American Economic Association, vol. 89(4), pages 748-780, September.
    39. Hao Li & Wing Suen, 2004. "Self-Fulfilling Early-Contracting Rush," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(1), pages 301-324, February.
    40. Alistair Wilson & Federico Echenique & Leeat Yariv, 2009. "Clearinghouses for Two-Sided Matching: An Experimental Study," Working Paper 487, Department of Economics, University of Pittsburgh, revised Dec 2013.
    41. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. When matching markets go crazy
      by Economic Logician in Economic Logic on 2009-06-09 13:34:00
    2. The Economic Logic of Anonymity and Pseudonymity
      by Al Roth in Market Design on 2009-06-12 12:22:00

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pablo Guillen & Rustamdjan Hakimov, 2017. "Not quite the best response: truth-telling, strategy-proof matching, and the manipulation of others," Experimental Economics, Springer;Economic Science Association, vol. 20(3), pages 670-686, September.
    2. Echenique, Federico & Pereyra, Juan Sebastián, 2016. "Strategic complementarities and unraveling in matching markets," Theoretical Economics, Econometric Society, vol. 11(1), January.
    3. Marie-Pierre Dargnies & Rustamdjan Hakimov & Dorothea Kübler, 2019. "Self-Confidence and Unraveling in Matching Markets," Management Science, INFORMS, vol. 65(12), pages 5603-5618, December.
    4. Konishi, Hideo & Sapozhnikov, Margarita, 2008. "Decentralized matching markets with endogenous salaries," Games and Economic Behavior, Elsevier, vol. 64(1), pages 193-218, September.
    5. Ambuehl, Sandro & Groves, Vivienne, 2020. "Unraveling over time," Games and Economic Behavior, Elsevier, vol. 121(C), pages 252-264.
    6. Muriel Niederle & Alvin E. Roth, 2004. "Market Culture: How Norms Governing Exploding Offers Affect Market Performance," Levine's Bibliography 122247000000000018, UCLA Department of Economics.
    7. Charness, Gary & Kuhn, Peter, 2011. "Lab Labor: What Can Labor Economists Learn from the Lab?," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 3, pages 229-330, Elsevier.
    8. Chen, Wei-Cheng & Chen, Yi-Yi & Kao, Yi-Cheng, 2018. "Limited choice in college admissions: An experimental study," Games and Economic Behavior, Elsevier, vol. 108(C), pages 295-316.
    9. Hakimov, Rustamdjan & Kübler, Dorothea, 2019. "Experiments On Matching Markets: A Survey," Rationality and Competition Discussion Paper Series 153, CRC TRR 190 Rationality and Competition.
    10. Siqi Pan, 2018. "Exploding offers and unraveling in two-sided matching markets," International Journal of Game Theory, Springer;Game Theory Society, vol. 47(1), pages 351-373, March.
    11. Guillen, Pablo & Hakimov, Rustamdjan, 2014. "Monkey see, monkey do: Truth-telling in matching algorithms and the manipulation of others," Discussion Papers, Research Unit: Market Behavior SP II 2014-202, WZB Berlin Social Science Center.
    12. repec:syd:wpaper:2123/9951 is not listed on IDEAS

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    More about this item

    Keywords

    Matching; Unraveling; Experiments; Market Design; Labor Demand and Supply;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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