Design of Matching Markets

The Research Area Comprises

  • Analysis of Existing Allocation Procedures
  • Design of Exchange and Assignment Algorithms
  • Software Solutions for Matching Problems

The research area “Design of Matching Markets” focuses on the analysis and design of markets in which supply and demand are not coordinated exclusively by price. In matching markets, the alternative allocation criteria include the personal preferences of the market participants. These preferences play a role in the sharing economy, but they are also a factor in education and labour markets, where the two sides must choose each other. For example, employees cannot freely choose their employers. They must also be chosen (and the other way around). A major challenge in these markets is to design the exchange or assignment mechanism so that all participants have an incentive to reveal their true preferences. This can prevent individual participants from taking advantage of others by strategically reporting their preferences. Existing exchange and assignment processes can be statistically analysed. Examples of these processes include gender and minority quotas on labour markets, or school choice in catchment areas.