Multi-Stage Decentralized Matching Markets: Uncertain Preferences and Strategic Behaviors

• URL: http://arxiv.org/abs/2102.06988v1
• Date: Sat, 13 Feb 2021 19:25:52 GMT
• Title: Multi-Stage Decentralized Matching Markets: Uncertain Preferences and Strategic Behaviors
• Authors: Xiaowu Dai and Michael I. Jordan
• Abstract summary: This article develops a framework for learning optimal strategies in real-world matching markets. We show that there exists a welfare-versus-fairness trade-off that is characterized by the uncertainty level of acceptance. We prove that participants can be better off with multi-stage matching compared to single-stage matching.
• Score: 91.3755431537592
• License: http://arxiv.org/licenses/nonexclusive-distrib/1.0/
• Abstract: Matching markets are often organized in a multi-stage and decentralized manner. Moreover, participants in real-world matching markets often have uncertain preferences. This article develops a framework for learning optimal strategies in such settings, based on a nonparametric statistical approach and variational analysis. We propose an efficient algorithm, built upon concepts of "lower uncertainty bound" and "calibrated decentralized matching," for maximizing the participants' expected payoff. We show that there exists a welfare-versus-fairness trade-off that is characterized by the uncertainty level of acceptance. Participants will strategically act in favor of a low uncertainty level to reduce competition and increase expected payoff. We study signaling mechanisms that help to clear the congestion in such decentralized markets and find that the effects of signaling are heterogeneous, showing a dependence on the participants and matching stages. We prove that participants can be better off with multi-stage matching compared to single-stage matching. The deferred acceptance procedure assumes no limit on the number of stages and attains efficiency and fairness but may make some participants worse off than multi-stage matching. We demonstrate aspects of the theoretical predictions through simulations and an experiment using real data from college admissions.

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