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A Dynamic Price-Setting Mechanism for a Hybrid Matching Market

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Abstract

After observing the problem of the intimate wear market of Nova Friburgo with the distribution of its product both in Brazil and abroad, we designed a dynamic allocation mechanism that sets the prices according to the demand from the buyers, based on their preferences, and that yields an allocation for the core of the market game in a finite number of steps. With this scheme, all agents are simultaneously present and all sellers sell to both national and international markets. We prove that the core allocation produced by this mechanism provides the lowest price among all outcomes for the core that maintains the same allocations of objects for international buyers as the final allocation. In addition, it coincides with the competitive allocation of minimum price equilibrium, when restricted to the national market, and with the allocation produced by the GaleShapley algorithm (1962), in which buyers make proposals and where there is a convenient tie-breaking rule, when all buyers are from abroad.

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  • Sotomayor, Marilda, 2003. "A Dynamic Price-Setting Mechanism for a Hybrid Matching Market," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 23(2), November.
    • Handle: RePEc:sbe:breart:v:23:y:2003:i:2:a:2727
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    1. Roth, Alvin E. & Sotomayor, Marilda, 1996. "Stable Outcomes in Discrete and Continuous Models of Two-Sided Matching: a Unified Treatment," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 16(2), November.
    2. Demange, Gabrielle & Gale, David & Sotomayor, Marilda, 1986. "Multi-Item Auctions," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 863-872, August.
    3. Leonard, Herman B, 1983. "Elicitation of Honest Preferences for the Assignment of Individuals to Positions," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 461-479, June.
    4. Sotomayor, Marilda, 1996. "A Non-constructive Elementary Proof of the Existence of Stable Marriages," Games and Economic Behavior, Elsevier, vol. 13(1), pages 135-137, March.
    5. Alvin E. Roth, 1982. "The Economics of Matching: Stability and Incentives," Mathematics of Operations Research, INFORMS, vol. 7(4), pages 617-628, November.
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