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Matching Through Position Auctions

Author

Listed:
  • Terence Johnson

    (Department of Economics, University of Notre Dame)

Abstract

This paper studies how an intermediary should design two-sided matching markets when agents are privately informed about their quality as a partner and can make payments to the intermediary. Using a mechanism design approach, I derive sufficient conditions for assortative matching to be profit- or welfare-maximizing, and then show how to implement the optimal match and payments through two-sided position auctions. This sharpens our understanding of intermediated matching markets by clarifying when assortative matching is a solution, and the nature of optimal price discrimination when there are cross-market externalities. An extension considers the case when the matchmaker cannot keep the reports or bids of the agents secret ex post, partially undermining his ability to block unprofitable matches.

Suggested Citation

  • Terence Johnson, 2009. "Matching Through Position Auctions," Working Papers 001, University of Notre Dame, Department of Economics, revised Jan 2011.
    • Handle: RePEc:nod:wpaper:001
    as

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    File URL: http://www3.nd.edu/~tjohns20/RePEc/deendus/wpaper/001_mtpa.pdf
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    References listed on IDEAS

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    13. Mark Armstrong Author-Email: mark.armstrong@ucl.ac.uk Author-Workplace-Name: University College of London, 2006. "Competition in Two-Sided Markets," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 668-691, Autumn.
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    Citations

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    Cited by:

    1. Bruno Jullien & Alessandro Pavan & Marc Rysman, 2021. "Two-sided markets, pricing, and network effects," Post-Print hal-03828345, HAL.
    2. Gomes, Renato & Pavan, Alessandro, 2016. "Many-to-many matching and price discrimination," Theoretical Economics, Econometric Society, vol. 11(3), September.
    3. Hafalir, Isa & Miralles, Antonio, 2015. "Welfare-maximizing assignment of agents to hierarchical positions," Journal of Mathematical Economics, Elsevier, vol. 61(C), pages 253-270.
    4. Widmer, Tobias & Leukel, Joerg, 2016. "Efficiency of electronic service allocation with privately known quality," European Journal of Operational Research, Elsevier, vol. 255(3), pages 856-868.
    5. Ashwin Kambhampati & Carlos Segura-Rodriguez, 2020. "The Optimal Assortativity of Teams Inside the Firm," PIER Working Paper Archive 20-018, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    6. Tobias Widmer & Paul Karaenke & Vijayan Sugumaran, 2021. "Two‐sided service markets: Effects of quality differentiation on market efficiency," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(3), pages 588-604, April.
    7. Dizdar, Deniz & Moldovanu, Benny, 2016. "On the importance of uniform sharing rules for efficient matching," Journal of Economic Theory, Elsevier, vol. 165(C), pages 106-123.
    8. Terence R. Johnson, 2019. "Synchronized matching with incomplete information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 67(3), pages 589-616, April.

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    More about this item

    Keywords

    Matching; Mechanism Design; Intermediation;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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