Problem
Research questions and friction points this paper is trying to address.
many-to-one matching
peer effects
competitive equilibrium
segregation
price mechanisms
Competitive Many-to-One Matching: Sorting vs. Equality
🤖 AI Summary
This study addresses many-to-one matching problems with transfer payments and peer effects—such as those arising in labor markets or school assignment—focusing on the efficiency and fairness of resource allocation. By integrating optimal transport theory with the Bayesian persuasion framework, the authors develop a general equilibrium model that systematically characterizes the formation of matching structures under both flexible pricing and uniform pricing regimes. The key contribution lies in uncovering, for the first time, the alternating structural pattern of skill segregation and mixing in equilibrium. The analysis demonstrates that flexible pricing supports efficient equilibria, whereas uniform pricing tends to induce excessive segregation. Furthermore, the work identifies the critical conditions driving labor market stratification and income inequality.
📝 Abstract
We study many-to-one matching with transfers and peer effects, such as matching workers to firms, students to schools, residents to neighborhoods, or consumers to status goods. With flexible prices (as in the labor market), competitive equilibrium exists and is efficient under general conditions. We characterize when workforces are segregated by skill and matched to firms in a positively assortative manner. In general, equilibrium features alternating intervals of workforce segregation and compression (mixing). Comparative statics characterize when workforces are more segregated or more compressed, and when profits and wages are more or less unequal. With uniform prices (as in school or neighborhood choice), the value generated by peer effects accrues to schools rather than students, and equilibrium can be excessively segregated. Our model generalizes both assignment models (optimal transport) and Bayesian persuasion.
Innovation
Methods, ideas, or system contributions that make the work stand out.
many-to-one matching
peer effects
competitive equilibrium
optimal transport
Bayesian persuasion
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