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Profit-maximizing matchmaker

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  • Ko, Chiu Yu
  • Konishi, Hideo

Abstract

This paper considers a resource allocation mechanism that utilizes a profit-maximizing auctioneer/matchmaker in the Kelso–Crawford (1982) (many-to-one) assignment problem. We consider general and simple (individualized price) message spaces for firmsʼ reports following Milgrom (2010). We show that in the simple message space, (i) the matchmakerʼs profit is always zero and an acceptable assignment is achieved in every Nash equilibrium, and (ii) the sets of stable assignments and strong Nash equilibria are equivalent. By contrast, in the general message space, the matchmaker may make a positive profit in a Nash equilibrium. This shows that restricting message space not only reduces the information requirement but also improves resource allocation.

Suggested Citation

  • Ko, Chiu Yu & Konishi, Hideo, 2012. "Profit-maximizing matchmaker," Games and Economic Behavior, Elsevier, vol. 75(1), pages 217-232.
    • Handle: RePEc:eee:gamebe:v:75:y:2012:i:1:p:217-232
    DOI: 10.1016/j.geb.2011.08.017
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    References listed on IDEAS

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    More about this item

    Keywords

    Two-sided matching problem; Resource allocation problem; Stable assignment; Strong Nash equilibrium; Core; Menu auction game; Implementation; Simplified mechanism;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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