Part IIB, Paper 4, Economic Theory and Analysis

Lent 2024

Aytek Erdil

Lecture 5

15 February 2024

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Matching junior doctors to hospitals
In many countries junior doctors are matched with their with first jobs via
centralised clearinghouses.

For example, in the US, every year more than 20 thousand doctors are
matched with around 3800 residency programmes.

While such centralised matching schemes are the dominant market

procedure to clear these labour markets, they weren’t always so.

In US, before the 1950s, the job market for junior doctors was
decentralised.

Prior to graduation, medical students would apply separately to hospitals

(residency programmes).

Hospitals would make offer/hiring decisions independently (i.e., without

coordination with other hospitals).

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Unraveling
One serious consequence of this regime was unravelling which, in this
context, means the job offers and acceptances (i.e., signing of contracts
between hospitals and doctors) moved earlier and earlier in doctors’
calendar. So much so that many candidates were hired several years prior
to finishing their studies.
Some consequences of unravelling of the matching process:

I Early offers/hires diminishes incentives to do well in exams, and

subsequently diminishes learning. Therefore those with good offers
early on can end up being less trained, and hence causing a
mismatch of top hospitals with not-the-best graduates.
I By signing contracts so early in their medical school years, students
make decisions about their specialties well before discovering their
strengths and preferences in medical practice. Another potential
source of mismatch.
I Likewise, hospitals making offers to students well before uncertainty
about students’ skills, talents, diligence, commitment, interests is
resolved. Again, decision making without sufficient information and
hence further inefficiency in matching 3/1
Some attempts to fix the issue
In 1945, the medical schools agreed not to reveal information about their
students to the hospitals until a fixed date.

However, the market remained decentralised.

• The short time frame between the release of information and the
date by which matches need to form creates a bottleneck, because there
remains the need for hospitals to decide whom to interview, in which
order to make offers; for students to decide how to respond to offers; the
hospitals to decide whom to make offers next, etc.

• Students might end up accepting first offers they receive due to risk
aversion or caution.

• Ambitious and/or optimistic students typically turn down their initial

offer in anticipation of more attractive offers, and might end up
unmatched or matched with a less preferred hospital if things don’t go as
they had anticipated.

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1952: a centralised system is introduced

Finally, a centralised system emerges thanks to a collaboration of medical

associations.

The National Resident Matching Program (NRMP) operates as

follows:

FIRST: Candidates submit to the NRMP their preference rankings over

the residencies they are interested in.
NEXT: Without seeing those preferences, hospitals submit their
preference rankings over the candidates interested in their positions.

FINALLY: An algorithm produces a matching.

Roth (1984) shows that this algorithm is equivalent to the

hospital-proposing DA.

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Hospital proposing DA

Suppose hospital h has qh posts to fill.

Step 1 (a) Each hospital h proposes to its top qh choice doctors.

(b) Each doctor tentatively holds her most preferred acceptable proposer,
and rejects all other proposers.

Step t ≥ 2: (a) Each hospital who has received any rejection in Step
(t − 1) proposes to its next k highest choices where k is the number of
rejections it received.
(b) Each doctor considers both new proposers and the hospital (if any)
held at Step (t − 1); tentatively holds her most preferred acceptable
hospital from this combined set of hospitals; and rejects the rest.

End the algorithm when no more proposals are made. Match each doctor
to the hospital she is holding.

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Will doctors and hospitals stick with the outcome?

Once the NRMP announces the final matching, it is important that no

group of doctors and hospitals are tempted to circumvent this outcome.

Theoretically, a desirable property of the final matching is that it is

group-stable, i.e., is robust potential blocking coalitions.

As before, a blocking coalition is a group of hospitals and doctors who

can collectively enact a new matching to their advantage.
Those doctors in this coalition would leave their NRMP match, and
instead rematch with hospitals in the coalition. To accommodate these
new hires, the hospitals might need to let go some of the doctors assigned
by NRMP. Finally, all doctors and hospitals involved would be better off.

Is the NRMP matching robust to such blocking coalitions?

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A critical assumption

A hospital h’s preferences %h over sets of doctors is responsive if

I T ∪ {d} %h T ∪ {d 0 } ⇐⇒ d %h d 0 where d, d 0 ∈
/T
I T ∪ {d} h T ⇐⇒ d h h
I T h T ∪ {d} ⇐⇒ h h d

Recall: the outcome of the DA algorithm is pairwise stable, i.e., it is

I individually rational (robust to blocking coalitions of size 1),
I non-wasteful and pairwise stable (hence robust to coalitions
consisting of one doctor and one hospital).

Theorem. If hospitals’ preferences over sets of doctors is responsive,

then pairwise stability implies robustness to blocking coalitions of any
size, i.e., group-stability.

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A more general class of hospital preferences
Consider a hospital that will face applications from a set of doctors.

Given any set S of doctors, let Ch(S) ⊆ S be the subset of doctors

chosen by the hospital.

A hospital’s preferences over sets of doctors are substitutable if:

j ∈S and j ∈ Ch(S ∪ {i}) ⇒ j ∈ Ch(S)

Exercise 1. Show that substitutability can equivalently be defined as:

S ⊆T ⇒ Ch(T ) ∩ S ⊆ Ch(S)

Exercise 2. Show: Responsive ⇒ substitutable.

Exercise 3. Show: if all hospitals have substitutable preferences, then
group stability is equivalent to pairwise stability. (Supervision 2.)

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The role of stability in a successful marketplace
Unlike in the US, the UK market is split into regional markets.
They differ in their procedures.

Those markets with stable matching producing procedures performed

relatively well, whereas those that do not were eventually abandoned.

Market Use stable Still in use?

algorithm? (in 1990)

Edinburgh (1969) Yes Yes

Cardiff Yes Yes
Cambridge No Yes
London Hospital No Yes
Birmingham No No
Edinburgh (1967) No No
Newcastle No No
Sheffield No No

London and Cambridge are exceptions: markets with a strong social

pressure, limiting the incentives to circumvent the matching procedure. 10 / 1
All sorted?

In this application, hospitals also have preferences.

What if they are strategic as well?

I No stable mechanism is strategyproof for both doctors and hospitals.

I No stable mechanism is strategyproof for hospitals.
I If the set of stable matchings is a singleton, truth-telling is a Nash
equilibrium.

Many doctors have partners who are also doctors participating in the
matching programme.

So these doctors have “complex” preferences.

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Suppose that couples report their preferences over pairs of hospitals.

1. Say X , Y are two hospitals with a seat each, s is a single doctor,

and m, w are a couple such that

%X %Y %s %(m,w )
m s X (X , Y )
s w Y

Is there a stable matching in this market?

2. Now suppose the couple (m, w ) have instead the following

preferences, whereas everyone else has the same preferences as
before:
%(m,w )
(X , Y )
(X , ∅)
(∅, Y )
Is there a stable matching in this market?

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