Jacob Leshno - University of Chicago

Micro Theory Seminar
When Oct 12, 2018
from 02:15 PM to 03:45 PM
Where 102 Kern
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Jacob Leshno from the University of Chicago will present "Costly Information Acquisition and Stable Matching Mechanisms"

Abstract:  This paper studies how matching mechanisms affect information acquisition. We develop a tractable model in which students’ decisions to acquire information about their preferences over schools depend on their priors and market information, and extend the definition of stability to this partial information setting. To characterize optimal outcomes we define regret-free stable outcomes, where the matching is stable and each student has acquired information optimally, as if she were last to market.

We show that regret-free stable outcomes have a cutoff characterization, and the set of regret-free stable outcomes is a non-empty lattice. However, there is no mechanism that always produces a regret-free stable matching, as there can be information deadlocks where every student finds it suboptimal to be the first to acquire information. In settings with sufficient information about the distribution of preferences, we provide mechanisms that exploit the cutoff structure to break the deadlock and approximately implement a regret-free stable matching. These findings help explain why in some settings commonly used matching mechanism perform well despite informational frictions.