A Room with a View: A Field Study of Matching with Externalities
M.Baccara (NYU, Stern), A. Imrohoroglu (USC, Marshall) and L.Yariv (Caltech)
We study the effects of network externalities on a unique matching protocol of faculty in a large US Business School to offices in a new building. We collected institutional, web, and survey data on faculty's attributes and choices. We first identify the different layers of the social network: workplace geography, co-authorship, and social interaction. The main insights of the paper pertain to illustrating the effects and the importance of the underlying networks on choices of macro neighborhoods in the building (namely, floors) and in choices of micro neighborhoods (i.e., office neighbors). After showing that the externalities are significant in explaining the faculty's choices, we also study how different locations within the network (in terms of an array of centrality and connectedness indices) affect outcomes. The study suggests the importance of accounting for externalities when designing centralized matching markets.