Making Marketplaces Safe: Dominant Individual Rationality and Applications to Market Design

Benjamin N. Roth () and Ran I. Shorrer ()
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Benjamin N. Roth: Harvard Business School, Boston, Massachusetts 02163
Ran I. Shorrer: Department of Economics, The Pennsylvania State University, State College, Pennsylvania 16801

Management Science, 2021, vol. 67, issue 6, 3694-3713

Abstract: Often market designers cannot force agents to join a marketplace rather than using pre-existing institutions. We propose a new desideratum for marketplace design that guarantees the safety of participation: dominant individual rationality (DIR). A marketplace is DIR if every pre-existing strategy is weakly dominated by some strategy within the marketplace. We study applications to the design of labor markets and the sharing economy. We also provide a general construction to achieve approximate DIR across a wide range of marketplace designs.

Keywords: market design; recruitment in two-sided marketplaces; individual rationality; safety (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:67:y:2021:i:6:p:3694-3713

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