Quick or cheap? Breaking points in dynamic markets

Arbeitspapier

We examine two-sided markets where players arrive stochastically over time and are drawn from a continuum of types. The cost of matching a client and provider varies, so a social planner is faced with two contending objectives: a) to reduce players' waiting time before getting matched; and b) to form efficient pairs in order to reduce matching costs. We show that such markets are characterized by a quick or cheap dilemma: Under a large class of distributional assumptions, there is no 'free lunch', i.e., there exists no clearing schedule that is simultaneously optimal along both objectives. We further identify a unique breaking point signifying a stark reduction in matching cost contrasted by an increase in waiting time. Generalizing this model, we identify two regimes: one, where no free lunch exists; the other, where a window of opportunity opens to achieve a free lunch. Remarkably, greedy scheduling is never optimal in this setting.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 338

Classification and Topics

• Classification: Wirtschaft ; Market Design ; Bargaining Theory; Matching Theory ; Mathematical Methods; Programming Models; Mathematical and Simulation Modeling: General ; Information, Knowledge, and Uncertainty: General
• Subject: dynamic matching ; online markets ; market design

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Mertikopoulos, Panayotis ; Nax, Heinrich H. ; Pradelski, Bary S. R.
• Event: Veröffentlichung
• (who): University of Zurich, Department of Economics
• (where): Zurich
• (when): 2019

Further information

• DOI: doi:10.5167/uzh-182597
• Handle: http://hdl.handle.net/10419/213442
• Last update: 10.03.2025, 11:41 AM CET