We study how to allocate indivisible items or partners when prices do not play an important role. Instead, agents in these markets have preferences over the different choices. You may think of a job market where workers and firms are not only matched based upon the wage but according to their personal skills and taste. Although the allocation cannot be done with the help of the price mechanism, the solution should be economically reasonable which means that it is either efficient or fulfills a fairness criterion. To reach such a solution, different matching mechanisms are used. We study and develop these mechanisms theoretically but also empirically and experimentally in the real world.
There are a lot of different applications where theoretical results are used to solve problems in the real world by analyzing and designing the market and its allocation mechanism. All over the world students are matched to schools with the help of matching algorithms, organs are exchanged, and doctors are allocated to hospitals. At our faculty we use a matching mechanism to allocate students to chairs when they want to write their theses. And perhaps some of you have already used another matching application by using Tinder or another dating app.
For a start, we recommend the following book which gives a nice, non-technical introduction into the topic:
Roth, Alvin E. (2015). Who gets what—and why: The new economics of matchmaking and market design. Houghton Mifflin Harcourt.
If you want to dig deeper start with the first and most influential paper on matching:
Gale, D., & Shapley, L. S. (1962). College admissions and the stability of marriage. The American Mathematical Monthly, 69(1), 9-15.
If you want to know more about how to allocate students to schools start with the following paper:
Abdulkadiroğlu, A., & Sönmez, T. (2003). School choice: A mechanism design approach. American economic review, 93(3), 729-747.
And of course you should check out our publications here.
W2498 – Matching in Practice
W4467 - Auctions, Incentives and Matchings
Who is working on this topic at the Chair of Microeconomics?
Prof. Dr. Claus-Jochen Haake