Multidimensional Platform Design

By André Veiga, E. Glen Weyl, and Alexander White

American Economic Review, May 2017

Successful platforms attract not just many users, but also those of the right kind. 'The right kind of user' is one who can either be directly monetized or who differentially attracts other valuable users. Bonacich centrality on the network of user sortin...

Discrete Pricing and Market Fragmentation: A Tale of Two-Sided Markets

By Yong Chao, Chen Yao, and Mao Ye

American Economic Review, May 2017

Security trading now fragments into more than ten almost identical stock exchanges in the United States. We show that discrete pricing is one economic force that prevents the consolidation of trading volume. The uniform one-cent tick size (minimum price v...

Recent Developments in Matching with Constraints

By Yuichiro Kamada and Fuhito Kojima

American Economic Review, May 2017

In an earlier work (Kamada and Kojima 2015), we introduced "matching with constraints," a two-sided matching problem in which the market is subject to feasibility constraints. That paper proposed and analyzed a possible solution to this problem and discus...

Redesigning the Israeli Psychology Master's Match

By Avinatan Hassidim, Assaf Romm, and Ran I. Shorrer

American Economic Review, May 2017

We report on the centralization of a two-sided matching-with-contracts market, in which pre-existing choice functions violate the substitutes condition. The ability to accommodate these choice functions was critical for the success of our design. The new ...

Large-Scale Affirmative Action in School Choice: Admissions to IITs in India

By Orhan Aygün and Bertan Turhan

American Economic Review, May 2017

We provide a real-life application of a large scale affirmative action policy in school choice in the context of engineering school admissions in India where students not only care about what program they are matched to but also what type of seat category...

Stable and Strategy-Proof Matching with Flexible Allotments

By John William Hatfield, Scott Duke Kominers, and Alexander Westkamp

American Economic Review, May 2017

We introduce a framework of matching with flexible allotments that can be used to model firms with cross-division hiring restrictions. Our framework also allows us to nest some prior models of matching with distributional constraints. Building upon our re...

The Mechanism Is Truthful, Why Aren't You?

By Avinatan Hassidim, Déborah Marciano, Assaf Romm, and Ran I. Shorrer

American Economic Review, May 2017

Honesty is the best policy in the face of a strategy-proof mechanism--irrespective of others' behavior, the best course of action is to report one's preferences truthfully. We review evidence from different markets in different countries and find that a s...

Mistaken Play in the Deferred Acceptance Algorithm: Implications for Positive Assortative Matching

By Alex Rees-Jones

American Economic Review, May 2017

Recent literature has documented failures of truthful preference reporting in the strategy-proof deferred acceptance algorithm. I consider the implications of these strategic mistakes for a common welfare consideration: the ability of the mechanism to sor...

Obvious Ex Post Equilibrium

By Shengwu Li

American Economic Review, May 2017

I propose a new solution concept, obvious ex post (OXP) equilibrium. This is a formal standard of cognitive simplicity for mechanisms, in settings with interdependent values. Under some standard assumptions, the ascending auction has an efficient OXP equi...

Bounded Rationality and Robust Mechanism Design: An Axiomatic Approach

By Luyao Zhang and Dan Levin

American Economic Review, May 2017

We propose an axiomatic approach to study the superior performance of mechanisms with obviously dominant strategies to those with only dominant strategies. Guided by the psychological inability to reason state-by-state, we develop Obvious Preference as a ...

Regression Discontinuity in Serial Dictatorship: Achievement Effects at Chicago's Exam Schools

By Atila Abdulkadiroǧlu, Joshua D. Angrist, Yusuke Narita, Parag A. Pathak, and Roman A. Zarate

American Economic Review, May 2017

Many school and college admission systems use centralized mechanisms to allocate seats based on applicant preferences and school priorities. When tie-breaking uses non-randomly assigned criteria like distance or a test score, applicants with the same pref...

Policy Analysis in Matching Markets

By Nikhil Agarwal

American Economic Review, May 2017

Price and quantity interventions intended to affect assignments are common in many labor and education markets (e.g., financial aid, quotas). This article discusses an empirical framework, based on the theory of stable matching, that is suitable for polic...

The Econometrics and Some Properties of Separable Matching Models

By Alfred Galichon and Bernard Salanié

American Economic Review, May 2017

We present a class of one-to-one matching models with perfectly transferable utility. We discuss identification and inference in these separable models, and we show how their comparative statics are readily analyzed.

Specifying a Structural Matching Game of Trading Networks with Transferable Utility

By Jeremy T. Fox

American Economic Review, May 2017

Structural estimation of matching games with transferable utility, including matching games of trading networks and many-to-many matching, is increasingly popular in empirical work. I explore several modeling decisions that need to be made when specifying...

Double/Debiased/Neyman Machine Learning of Treatment Effects

By Victor Chernozhukov, Denis Chetverikov, Mert Demirer, Esther Duflo, Christian Hansen, and Whitney Newey

American Economic Review, May 2017

Chernozhukov et al. (2016) provide a generic double/de-biased machine learning (ML) approach for obtaining valid inferential statements about focal parameters, using Neyman-orthogonal scores and cross-fitting, in settings where nuisance parameters are est...

Testing-Based Forward Model Selection

By Damian Kozbur

American Economic Review, May 2017

This paper defines and studies a variable selection procedure called Testing-Based Forward Model Selection. The procedure inductively selects covariates which increase predictive accuracy into a working statistical regression model until a stopping criter...

L₂-Boosting for Economic Applications

By Ye Luo and Martin Spindler

American Economic Review, May 2017

We present the L2-Boosting algorithm and two variants, namely post-Boosting and orthogonal Boosting. Building on results in Ye and Spindler (2016), we demonstrate how boosting can be used for estimation and inference of low-dimensional t...

Core Determining Class and Inequality Selection

By Ye Luo and Hai Wang

American Economic Review, May 2017

The relations between unobserved events and observed outcomes can be characterized by a bipartite graph. We propose an algorithm that explores the structure of the graph to construct the "exact Core Determining Class," i.e., the set of irredudant inequali...

Estimating Average Treatment Effects: Supplementary Analyses and Remaining Challenges

By Susan Athey, Guido Imbens, Thai Pham, and Stefan Wager

American Economic Review, May 2017

There is a large literature on semiparametric estimation of average treatment effects under unconfounded treatment assignment in settings with a fixed number of covariates. More recently attention has focused on settings with a large number of covariates....

What Can We Learn from Experiments? Understanding the Threats to the Scalability of Experimental Results

By Omar Al-Ubaydli, John A. List, and Dana L. Suskind

American Economic Review, May 2017

Policymakers often consider interventions at the scale of the population, or some other large scale. One of the sources of information about the potential effects of such interventions is experimental studies conducted at a significantly smaller scale. A ...