Varying the Number of Signals in Matching Markets
In large matching markets between job candidates and organizations, organizations may be unable to effectively identify interested candidates due to a large volume of applications. The resulting congestion makes it unlikely for candidates to receive offers from their most preferred organizations, leading to significant mismatch. We study how signaling mechanisms can be used as a market design tool to reduce the congestion in such markets. Specifically, we look at how the number of signals available to market participants affects welfare and the number of matches using a large market model. We show that for sufficiently many signals, candidate welfare and the number of matches decrease as a function of the number of signals, while the behavior of organization welfare depends on the extent to which organizations value top candidates. Furthermore, we describe a class of firm utility functions for which these limiting effects start to hold at realistic numbers of signals S.
KeywordsSignaling Matching Large markets
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