A Dynamic Matching Mechanism for College Admissions: Theory and Experiment

Market design provides managerial insights into the success and failure of various market institutions in allocating scarce resources. We investigate a dynamic matching mechanism used in real-world college admissions, where students share a common priority ranking. Theoretically, we prove that efficient and stable matching occurs with an arbitrarily high probability, assuming sufficient revision opportunities and rationality. This predicts that the dynamic mechanism is less stable than the deferred acceptance mechanism and less efficient than the Boston mechanism. We confirm this prediction in a low-complexity laboratory setting. However, in a high-complexity setting, the dynamic mechanism matches the stability of the deferred acceptance and the efficiency of the Boston mechanism, as both underperform in this setting. This finding indicates that the dynamic mechanism is more resilient to increased complexity. We attribute this resilience to its belief-independent characterization of rationalizable strategies. Beyond college admissions, the dynamic mechanism has potential applications in housing assignments, job allocations, and ascending auctions.