Matching Markets in Real Life
Matching Markets, as discussed in lecture are everywhere. Google advertisements were an example that was touched on during class. The competitiveness of getting an advertisement on Google is a great representation of why the buyer and seller both care “about who they are matched with” (CBS News).
The CBS News article linked below discusses some of the drawbacks to competitive matching markets like college admission processes. The article discusses “Jumping the Gun”. This is best represented in college admissions. Every student that applies wants to get into his or her top choice and the college, likewise, wants to get the students that best fit the school. Jumping the Gun follows from the college’s want for quality students. They, in theory, will start accepting students earlier and earlier to try and convince students to pick their school. This model is really inefficient – eventually, the market breaks down.
According to the article, the best way to avoid this type of issue is to place a “compliance agreement”. This agreement would restrict one party from requiring a decision without all the possible information. In the case of colleges, it would be something like “not be required to accept teaching or research assistant offers prior to April 15” (CBS News).
Jumping the Gun is one example of something that could destroy a market, and the article continues on to discuss the “Gale-Shapely” algorithm which essentially finds “a stable, efficient set of pairings — there is no way to improve the outcome by changing the matches” (CBS News).
This idea of Jumping the Gun presents a whole set of questions about the efficiency and fairness of matching markets and how that affects the economy and society as a whole.
https://www.cbsnews.com/news/a-nobel-for-work-that-affects-your-daily-life/