Matching Through Position Auctions
AbstractThis 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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Bibliographic InfoPaper provided by University of Notre Dame, Department of Economics in its series Working Papers with number 001.
Length: 23 pages
Date of creation: Jul 2009
Date of revision: Jan 2011
Matching; Mechanism Design; Intermediation;
Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - 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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