The Dynamics of Reorganization in Matching Markets: A Laboratory Experiment Motivated by A Natural Experiments*
- 1 February 2000
- journal article
- Published by Oxford University Press (OUP) in The Quarterly Journal of Economics
- Vol. 115 (1), 201-235
- https://doi.org/10.1162/003355300554719
Abstract
We create an environment in which congestion forces agents to match inefficiently early. We then introduce one of two centralized clearinghouse mechanisms. One of these has been successfully used to halt this kind of unraveling in a number of labor markets, while the other has failed. When it is costly for firms and workers to be mismatched compared with the costs of matching early, the experimental observations reproduce the field observations. Furthermore, the experiment permits us to observe the transition between a decentralized and a centralized market, both when the centralized market fails to control unraveling and when it succeeds, at a level of detail unavailable in field data.Keywords
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