Two-Sided Investment and Matching with Multi-Dimensional Cost Types and Attributes

43 Pages Posted: 19 Nov 2013 Last revised: 3 Jan 2017

See all articles by Deniz Dizdar

Deniz Dizdar

University of Montreal - Department of Economics

Date Written: December 31, 2016

Abstract

Heterogeneous buyers and sellers must make investments before entering a continuum assignment market. I show that efficient ex-post contracting equilibria (Cole, Mailath and Postlewaite 2001a) exist in a general assignment game framework. I then shed light on what enables and what precludes coordination failures. A simple condition, absence of technological multiplicity, guarantees efficient investments for each pair, but a mismatch of agents may still occur. However, using optimal transport theory, I also show that mismatch is heavily constrained in certain multi-dimensional environments with differentiated agents and no technological multiplicity. Under technological multiplicity, even extreme ex-ante heterogeneity need not preclude inefficiencies.

Keywords: Matching, pre-match investments, coordination failure, mismatch, multi-dimensional attributes, assignment game, optimal transport

JEL Classification: C78, D41, D51

Suggested Citation

Dizdar, Deniz, Two-Sided Investment and Matching with Multi-Dimensional Cost Types and Attributes (December 31, 2016). Available at SSRN: https://ssrn.com/abstract=2357087 or http://dx.doi.org/10.2139/ssrn.2357087

Deniz Dizdar (Contact Author)

University of Montreal - Department of Economics ( email )

C.P. 6128, succursale Centre-Ville
Montreal, Quebec H3C 3J7
Canada

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