Dynamic Type Matching

Ming Hu () and Yun Zhou ()
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Ming Hu: Operations Management and Statistics, Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada
Yun Zhou: DeGroote School of Business, McMaster University, Hamilton, Ontario L8S 4L8, Canada

Manufacturing & Service Operations Management, 2022, vol. 24, issue 1, 125-142

Abstract: Problem definition : We consider an intermediary’s problem of dynamically matching demand and supply of heterogeneous types in a periodic-review fashion. Specifically, there are two disjoint sets of demand and supply types, and a reward for each possible matching of a demand type and a supply type. In each period, demand and supply of various types arrive in random quantities. The platform decides on the optimal matching policy to maximize the expected total discounted rewards, given that unmatched demand and supply may incur waiting or holding costs, and will be fully or partially carried over to the next period. Academic/practical relevance : The problem is crucial to many intermediaries who manage matchings centrally in a sharing economy. Methodology : We formulate the problem as a dynamic program. We explore the structural properties of the optimal policy and propose heuristic policies. Results : We provide sufficient conditions on matching rewards such that the optimal matching policy follows a priority hierarchy among possible matching pairs. We show that those conditions are satisfied by vertically and unidirectionally horizontally differentiated types, for which quality and distance determine priority, respectively. Managerial implications : The priority property simplifies the matching decision within a period, and the trade-off reduces to a choice between matching in the current period and that in the future. Then the optimal matching policy has a match-down-to structure when considering a specific pair of demand and supply types in the priority hierarchy.

Keywords: dynamic matching; sharing economy; match-down-to policy; horizontal differentiation; vertical differentiation; Monge sequence; assignment problem; priority structure (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormsom:v:24:y:2022:i:1:p:125-142

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