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Matching Through Position Auctions

Terence Johnson ()

No 1, Working Papers from University of Notre Dame, Department of Economics

Abstract: 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.

Keywords: Matching; Mechanism Design; Intermediation (search for similar items in EconPapers)
JEL-codes: C78 D44 D85 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2009-07, Revised 2011-01
References: Add references at CitEc
Citations: View citations in EconPapers (9)

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