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Games 2013, 4(2), 243-282; doi:10.3390/g4020243
Article

Unraveling Results from Comparable Demand and Supply: An Experimental Investigation

1,2
, 3
 and 4,*
1 Department of Economics, Stanford University, Stanford, CA 94305-6072, USA 2 National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138, USA 3 Department of Economics, Stanford University, Stanford, CA 94305-6072, USA 4 Department of Economics, Boston College, Chestnut Hill, MA 02467, USA
* Author to whom correspondence should be addressed.
Received: 30 March 2013 / Revised: 4 May 2013 / Accepted: 6 May 2013 / Published: 19 June 2013
(This article belongs to the Special Issue Games and Matching Markets)
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Abstract

Markets sometimes unravel, with offers becoming inefficiently early. Often this is attributed to competition arising from an imbalance of demand and supply, typically excess demand for workers. However this presents a puzzle, since unraveling can only occur when firms are willing to make early offers and workers are willing to accept them. We present a model and experiment in which workers’ quality becomes known only in the late part of the market. However, in equilibrium, matching can occur (inefficiently) early only when there is comparable demand and supply: a surplus of applicants, but a shortage of high quality applicants.
Keywords: Two-side Matching; market design; unraveling; experiments Two-side Matching; market design; unraveling; experiments
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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Niederle, M.; Roth, A.E.; Ünver, M.U. Unraveling Results from Comparable Demand and Supply: An Experimental Investigation. Games 2013, 4, 243-282.

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