Publication Date: July 2015
We study eﬀicient and stable mechanisms in matching markets when the number of agents is large and individuals’ preferences and priorities are drawn randomly. When agents’ preferences are uncorrelated, then both eﬀiciency and stability can be achieved in an asymptotic sense via standard mechanisms such as deferred acceptance and top trading cycles. When agents’ preferences are correlated over objects, however, these mechanisms are either ineﬀicient or unstable even in an asymptotic sense. We propose a variant of deferred acceptance that is asymptotically eﬀicient, asymptotically stable and asymptotically incentive compatible. This new mechanism performs well in a counterfactual calibration based on New York City school choice data.
Supplement pages: 42
Large matching markets, Pareto eﬀiciency, Stability, Fairness, Payoﬀ equivalence, Asymptotic eﬀiciency, and Asymptotic stability
JEL Classification Codes: C70, D47, D61, D63