This paper introduces a stylized model to capture distinctive features of waiting list allocation mechanisms. First, agents choose among items with associated expected wait times. Waiting times serve a similar role to that of monetary prices in directing agents' choices and rationing items. Second, the expected wait for an item is endogenously determined and randomly fluctuates over time. We evaluate welfare under these endogenously determined waiting times and find that waiting time fluctuations lead to misallocation and welfare loss. A simple randomized assignment policy can reduce misallocation and increase welfare.

This article develops a tractable theoretical framework for the Top Trading Cycles (TTC) mechanism for school choice that allows quantifying welfare and optimizing policy decisions. We compute welfare for TTC and Deferred Acceptance (DA) under different priority structures and find that the choice of priorities can have larger welfare implications than the choice of mechanism. We solve for the welfare-maximizing distributions of school quality for parametrized economies and find that optimal investment decisions can be very different under TTC and DA. Our framework relies on a novel characterization of the TTC assignment in terms of a cutoff for each pair of schools. These cutoffs parallel prices in competitive equilibrium, with students’ priorities serving the role of endowments. We show that these cutoffs can be computed directly from the distribution of preferences and priorities in a continuum model and derive closed-form solutions and comparative statics for parameterized settings. The TTC cutoffs not only clarify the role of priorities in determining the TTC assignment but also demonstrate that TTC is more complicated than DA.

This paper develops a price-theoretic framework for matching markets with heterogeneous preferences. The model departs from the Gale and Shapley model by assuming that a finite number of agents on one side (colleges) are matched to a continuum of agents on the other side (students). We show that stable matchings correspond to solutions of supply and demand equations, with the selectivity of each college playing a role similar to that of prices. We apply the model to an analysis of how competition induced by school choice gives schools incentives to invest in quality and to asymptotics of school choice mechanisms.

We study competition in matching markets with random heterogeneous preferences and an unequal number of agents on either side. First, we show that even the slightest imbalance yields an essentially unique stable matching. Second, we give a tight description of stable outcomes, showing that matching markets are extremely competitive. Each agent on the short side of the market is matched with one of his top choices, and each agent on the long side either is unmatched or does almost no better than being matched with a random partner. Our results suggest that any matching market is likely to have a small core, explaining why small cores are empirically ubiquitous.

Bitcoin provides its users with transaction-processing services which are similar to those of traditional payment systems. This article models the novel economic structure implied by Bitcoin’s innovative decentralized design, which allows the payment system to be reliably operated by unrelated parties called miners. We find that this decentralized design protects users from monopoly pricing. Competition among service providers within the platform and free entry imply no entity can profitably affect the level of fees paid by users. Instead, a market for transaction-processing determines the fees users pay to gain priority and avoid transaction-processing delays. The article (i) derives closed-form formulas of the fees and waiting times and studies their properties, (ii) compares pricing under the Bitcoin Payment System to that under a traditional payment system operated by a profit-maximizing firm, and (iii) suggests protocol design modifications to enhance the platform’s efficiency. The Appendix describes and explains the main attributes of Bitcoin and the underlying blockchain technology.