Matching Through Position Auctions
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.
|Date of creation:||Jul 2009|
|Date of revision:||Jan 2011|
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