A Supply and Demand Framework for Two-Sided Matching Markets

This paper develops a price-theoretic framework for matching markets with heterogeneous preferences. The model departs from the Gale and Shapley model by assuming that a finite number of agents on one side (colleges) arematched to a continuum of agents on the other side (students). We show that stab...

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Bibliographic Details
Published in:The Journal of political economy 2016-10, Vol.124 (5), p.1235-1268
Main Authors: Azevedo, Eduardo M., Leshno, Jacob D.
Format: Article
Language:English
Subjects:
Brand preferences
Economic theory
Political economy
School choice
Studies
Supply & demand
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Summary:This paper develops a price-theoretic framework for matching markets with heterogeneous preferences. The model departs from the Gale and Shapley model by assuming that a finite number of agents on one side (colleges) arematched to a continuum of agents on the other side (students). We show that stablematchings correspond to solutions of supply and demand equations, with the selectivity of each college playing a role similar to that of prices. We apply the model to an analysis of how competition induced by school choice gives schools incentives to invest in quality and to asymptotics of school choice mechanisms.
ISSN:0022-3808
1537-534X
DOI:10.1086/687476