The Multiplier Effect in Two-Sided Markets With Bilateral Investments

Benny Moldovanu (), Deniz Dizdar and Nora Szech

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: Agents in a finite two-sided market are matched assortatively, based on costly investments. Besides signaling private, complementary types, investments generate direct benefits for partners. We explore quantitative properties of the equilibrium investment behavior. The bilateral external benefits induce an investment multiplier effect. This multiplier effect depends in a complex way on agents’ uncertainty about their own rank and about the types and investments of potential partners. We characterize how the multiplier effect hinges on market size, and how it interacts with other important factors such as the costs of investment and the signaling incentives induced by competition.

Keywords: two-sided matching; signaling; investment; multiplier effect (search for similar items in EconPapers)
JEL-codes: C78 D44 D82 (search for similar items in EconPapers)
Pages: 43
Date: 2018-07
New Economics Papers: this item is included in nep-com, nep-des, nep-gth and nep-mic
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https://www.crctr224.de/research/discussion-papers/archive/dp030 (application/pdf)

Related works:
Working Paper: The Multiplier Effect in Two-Sided Markets with Bilateral Investments (2017)
Working Paper: The multiplier effect in two-sided markets with bilateral investments (2017)
Working Paper: The multiplier effect in two-sided markets with bilateral investments (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2018_030

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