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Two-Sided Investment and Matching with Multidimensional Cost Types and Attributes

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  • Deniz Dizdar

Abstract

Heterogeneous buyers and sellers must make investments before entering a continuum assignment market. I show that efficient ex post contracting equilibria (Cole, Mailath and Postlewaite 2001b) exist in a general assignment game framework. I then shed light on what enables and what precludes coordination failures. A simple condition, absence of technological multiplicity, guarantees efficient investments for each pair, but a mismatch of agents may still occur. However, using optimal transport theory, I also show that mismatch is heavily constrained in certain multi-dimensional environments with differentiated agents and no technological multiplicity. Under technological multiplicity, even extreme ex ante heterogeneity need not preclude inefficiencies.

Suggested Citation

  • Deniz Dizdar, 2018. "Two-Sided Investment and Matching with Multidimensional Cost Types and Attributes," American Economic Journal: Microeconomics, American Economic Association, vol. 10(3), pages 86-123, August.
    • Handle: RePEc:aea:aejmic:v:10:y:2018:i:3:p:86-123
    Note: DOI: 10.1257/mic.20150147
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    Citations

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    Cited by:

    1. Deniz Dizdar & Benny Moldovanu & Nora Szech, 2017. "The Multiplier Effect in Two-Sided Markets with Bilateral Investments," CESifo Working Paper Series 6803, CESifo.
    2. Georg Nöldeke & Larry Samuelson, 2015. "Investment and Competitive Matching," Econometrica, Econometric Society, vol. 83(3), pages 835-896, May.
    3. Dizdar, Deniz & Moldovanu, Benny & Szech, Nora, 2019. "The feedback effect in two-sided markets with bilateral investments," Journal of Economic Theory, Elsevier, vol. 182(C), pages 106-142.
    4. Elliott, M. & Talamàs, E., 2020. "Bargaining Foundations for Price Taking in Matching Markets," Cambridge Working Papers in Economics 2070, Faculty of Economics, University of Cambridge.
    5. Michael Greinecker & Christopher Kah, 2021. "Pairwise Stable Matching in Large Economies," Econometrica, Econometric Society, vol. 89(6), pages 2929-2974, November.
    6. Zhang, Hanzhe, 2020. "Pre-matching gambles," Games and Economic Behavior, Elsevier, vol. 121(C), pages 76-89.
    7. Thomas Gall, 2017. "Surplus efficiency of ex ante investments in matching markets with nontransferabilities," International Journal of Game Theory, Springer;Game Theory Society, vol. 46(1), pages 51-78, March.
    8. Seungjin Han, 2019. "Pre-Match Investment Competition with Bounded Transfers," Department of Economics Working Papers 2019-01, McMaster University.
    9. repec:cte:werepe:23566 is not listed on IDEAS
    10. repec:ris:msuecw:2019_012 is not listed on IDEAS

    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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