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Managing Congestion in Matching Markets

Author

Listed:
  • Nick Arnosti

    (Columbia Business School, Columbia University, New York, New York 10027)

  • Ramesh Johari

    (Department of Management Science and Engineering, Stanford University, Stanford, California 94305)

  • Yash Kanoria

    (Columbia Business School, Columbia University, New York, New York 10027)

Abstract

Problem definition : Participants in matching markets face search and screening costs when seeking a match. We study how platform design can reduce the effort required to find a suitable partner. Practical/academic relevance : The success of matching platforms requires designs that minimize search effort and facilitate efficient market clearing. Methodology : We study a game-theoretic model in which “applicants” and “employers” pay costs to search and screen. An important feature of our model is that both sides may waste effort: Some applications are never screened, and employers screen applicants who may have already matched. We prove existence and uniqueness of equilibrium and characterize welfare for participants on both sides of the market. Results : We identify that the market operates in one of two regimes: It is either screening - limited or application - limited . In screening-limited markets, employer welfare is low, and some employers choose not to participate. This occurs when application costs are low and there are enough employers that most applicants match, implying that many screened applicants are unavailable. In application-limited markets, applicants face a “tragedy of the commons” and send many applications that are never read. The resulting inefficiency is worst when there is a shortage of employers. We show that simple interventions—such as limiting the number of applications that an individual can send, making it more costly to apply, or setting an appropriate market-wide wage—can significantly improve the welfare of agents on one or both sides of the market. Managerial implications : Our results suggest that platforms cannot focus exclusively on attracting participants and making it easy to contact potential match partners. A good user experience requires that participants not waste effort considering possibilities that are unlikely to be available. The operational interventions we study alleviate congestion by ensuring that potential match partners are likely to be available.

Suggested Citation

  • Nick Arnosti & Ramesh Johari & Yash Kanoria, 2021. "Managing Congestion in Matching Markets," Manufacturing & Service Operations Management, INFORMS, vol. 23(3), pages 620-636, May.
  • Handle: RePEc:inm:ormsom:v:23:y:2021:i:3:p:620-636
    DOI: 10.1287/msom.2020.0927
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    References listed on IDEAS

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    Cited by:

    1. Jaehwuen Jung & Hyungsoo Lim & Dongwon Lee & Chul Kim, 2022. "The Secret to Finding a Match: A Field Experiment on Choice Capacity Design in an Online Dating Platform," Information Systems Research, INFORMS, vol. 33(4), pages 1248-1263, December.
    2. Ali Aouad & Daniela Saban, 2023. "Online Assortment Optimization for Two-Sided Matching Platforms," Management Science, INFORMS, vol. 69(4), pages 2069-2087, April.
    3. Peng Shi, 2023. "Optimal Matchmaking Strategy in Two-Sided Marketplaces," Management Science, INFORMS, vol. 69(3), pages 1323-1340, March.
    4. Behnaz Bojd & Hema Yoganarasimhan, 2022. "Star-Cursed Lovers: Role of Popularity Information in Online Dating," Marketing Science, INFORMS, vol. 41(1), pages 73-92, January.
    5. Ni Huang & Gordon Burtch & Yumei He & Yili Hong, 2022. "Managing Congestion in a Matching Market via Demand Information Disclosure," Information Systems Research, INFORMS, vol. 33(4), pages 1196-1220, December.
    6. Hernandez Senosiain, Patricio, 2022. "Why Do Men Keep Swiping Right? Two-Sided Search in Swipe-Based Dating Platforms," Warwick-Monash Economics Student Papers 37, Warwick Monash Economics Student Papers.

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