Many centralized college admissions markets allocate seats to students based on their performance on a single standardized exam. The exam's measurement error can cause the exam-derived priorities to deviate from colleges' aptitude-based preferences. Previous literature proposes to combine pre-exam preference submission with a Boston algorithm (a PreExam-BOS mechanism). This paper examines the proposed mechanism in an experiment where students are not fully informed of their relative aptitudes. The results show pre-exam preference submission is distorted by overconfidence and PreExam-BOS fails to achieve stable matching with respect to aptitudes. Compared to a post-score Serial Dictatorship mechanism, which is robust to overconfidence but more prone to the exam's measurement error, PreExam-BOS creates more mismatches and a greater variance in the extent of mismatches: some students receive a large advantage while others are hurt considerably. Moreover, PreExam-BOS rewards overconfidence and punishes underconfidence. The observed overconfidence cannot be mitigated with an improved information condition.
This paper studies targeted advertising in two-sided markets. Two platforms, with different targeting abilities, compete for single-homing consumers, while advertising firms are multi-homing. Ads overall impose negative externalities on consumers. When the targeting ability of the advantaged platform increases, (i) the advantaged platform will have more advertising firms, attract more consumers, and become more profitable, but its ad price and total volume of ads could either increase or decrease; (ii) the disadvantaged platform will have fewer advertising firms, attract fewer consumers, have fewer ads in total, increase its ad price, and become less profitable; (iii) all consumers will be better off. Finally, we compare social incentives and equilibrium incentives in investing in targeting ability, and find that underinvestment is most likely to occur.
Many two-sided matching markets tend to unravel in time with transactions becoming ineciently early. In a two-period decentralized model, this paper shows that when a market culture allows rms to make exploding oers, unraveling is more likely to occur and lead to a less socially desirable matching outcome. A market with a larger uncertainty in early stages is not necessarily more vulnerable to the presence of exploding oers: the conclusion depends on the specic information structure. A market tends to be less vulnerable to exploding oers when there is an excess supply of labor. While a banning policy on exploding oers tends to be supported by high quality rms and workers, it can be opposed by those of low qualities. This explains the prevalence of exploding oers in practice.
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