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Matching Through Position Auctions

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  • 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.

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File URL: http://www3.nd.edu/~tjohns20/RePEc/deendus/wpaper/001_mtpa.pdf
File Function: First version, 2011
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Bibliographic Info

Paper provided by University of Notre Dame, Department of Economics in its series Working Papers with number 001.

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Length: 23 pages
Date of creation: Jul 2009
Date of revision: Jan 2011
Handle: RePEc:nod:wpaper:001

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Postal: 434 Flanner Hall, Notre Dame, IN 46556
Phone: (574) 631-7698
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Web page: http://economics.nd.edu
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Related research

Keywords: Matching; Mechanism Design; Intermediation;

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References

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  1. Hoppe, Heidrun C. & Moldovanu, Benny & Sela, Aner, 2005. "The Theory of Assortative Matching Based on Costly Signals," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 85, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  2. R. Preston McAfee, 2002. "Coarse Matching," Econometrica, Econometric Society, vol. 70(5), pages 2025-2034, September.
  3. Jeremy Bulow & Jonathan Levin, 2005. "Matching and Price Competition," NBER Working Papers 11506, National Bureau of Economic Research, Inc.
  4. Ettore Damiano & Hao Li, 2007. "Price discrimination and efficient matching," Economic Theory, Springer, vol. 30(2), pages 243-263, February.
  5. Heidrun Hoppe & Benny Moldovanu & Emre Ozdenoren, 2011. "Coarse matching with incomplete information," Economic Theory, Springer, vol. 47(1), pages 75-104, May.
  6. Board, Simon, 2009. "Monopolistic group design with peer effects," Theoretical Economics, Econometric Society, vol. 4(1), March.
  7. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
  8. Paul Milgrom, 2003. "Matching with Contracts," Working Papers 03003, Stanford University, Department of Economics.
  9. Gary S. Becker, 1974. "A Theory of Marriage: Part II," NBER Chapters, in: Marriage, Family, Human Capital, and Fertility, pages 11-26 National Bureau of Economic Research, Inc.
  10. Paul Milgrom & Ilya Segal, 2002. "Envelope Theorems for Arbitrary Choice Sets," Econometrica, Econometric Society, vol. 70(2), pages 583-601, March.
  11. repec:bla:restud:v:76:y:2009:i:1:p:253-281 is not listed on IDEAS
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