Matching Markets ft Discrimination
In class, we have learned much in depth material on matching markets, Nash equilibrium and VCG. The examples we have learned about, however, are not always as simple or as isolated as they have been (in an effort to teach such foundational principles). These examples have been isolated from real-life scenarios that alter matching markets in a way that is not directly related to economics. For instance, in Ali Ahmed’s essay “Discrimination in the rental housing market: A field experiment on the Internet,” Ahmed explains that the rental market for housing has been and continues to be discriminatory. He concludes that Arabic men received much fewer enquiries and showings than the Swedish men. And that Swedish women are met with less difficulty when looking for an apartment than Swedish men. Ethnic, as well as gender discrimination exists in the Swedish rental housing market.
Discrimination has not truly been accounted for in our learning of matching markets in class thus far. Matching markets assume that the economics of the situation will play out and that a bidder’s value for an item, in relation to other bidders, is what will ultimately determine the end result of a market. However, discrimination is not accounted for in these scenarios. While discrimination is an economically unwise decision, and, of course, amoral, it is happening and should be accounted for accordingly. While the value of the bidder in the market does not change, the value the seller imposes on Arab men and women as a whole is minimized based on discrimination tactics. It would be interesting to see how marching markets, as shown in models like graphs and tables, account for such discrimination when assigning values and prices. This article does not explain how discrimination is accounted for matching markets but is a good starting point in developing this question.
Reference: https://www.sciencedirect.com/science/article/pii/S0094119008000181