By Song Zifeng, Research Department of Industrial Economy, and Shi Guang, Department of Techno-Economic Research, the DRC

Research Report No 164, 2013

Abstract:

The theory of stable allocations is a piece of research relating to modern economics. Alvin E. Roth and Lloyd S. Shapley won the Nobel Memorial Prize in Economic Sciences for the theory of stable allocations and the practice of market design.

The theory of stable allocations is related with game theory, mechanism design theory and experimental economics. It aims to realize stable and efficient allocation of resources in areas where the price mechanism is restricted. The theory can effectively solve information and incentive problems and improve social welfare.

The report briefly introduces the background, development and model of the theory of stable allocations, and analyzes "deferred acceptance" and "transaction cycle" mechanisms. It then reviews the application of the theory on foreign labor markets, school matching and organ donations since the middle of the 20th century. It has made suggestions on the application of the theory of stable allocations in domestic education, employment, medical treatment, scientific research, and cadre selection and appointment.