Information Disclosure and Unraveling in Matching Markets

Information Disclosure and Unraveling in Matching Markets

By
Michael Ostrovsky, Michael Schwarz
American Economic Journal: Microeconomics. May
2010, Vol. 2, Issue 2, Pages 34-63

This paper explores information disclosure in matching markets. A school may suppress some information about students in order to improve their average job placement. We consider a setting with many schools, students, and jobs, and show that if early contracting is impossible, the same, “balanced” amount of information is disclosed in essentially all equilibria. When early contracting is allowed and information arrives gradually, if schools disclose the balanced amount of information, students and employers will not find it profitable to contract early. If they disclose more, some students and employers will prefer to sign contracts before all information is revealed. (JEL C78, D82, D83)