A Theory of Decentralized Matching Markets Without Transfers, with an Application to Surge Pricing

37 Pages Posted: 20 Dec 2016 Last revised: 14 Jan 2017

Alfred Galichon

NYU, Department of Economics and Courant Institute

Yu-Wei Hsieh

USC Dornsife Institute for New Economic Thinking

Multiple version iconThere are 2 versions of this paper

Date Written: January 13, 2017

Abstract

Most of the literature on two-sided matching markets without transfers focuses on the case where a central planner (often an algorithm) clears the market, like in the case of school assignments, or medical residents. In contrast, we focus on decentralized matching markets without transfers, where prices are regulated and thus cannot clear the market, as in the case of taxis. In these markets, time waited in line often plays the role of a numéraire. We investigate the properties of equilibrium in these markets (existence, uniqueness, and welfare). We use this analysis to study the problem of surge pricing: given beliefs on random demand and supply, how should a market designer set prices to minimize expected market inefficiency?

Keywords: Two-sided matching, non-transferable utility matching, rationing by waiting, non-price rationing, disequilibrium, surge pricing, discrete choice

JEL Classification: C78, D58, D61

Suggested Citation

Galichon, Alfred and Hsieh, Yu-Wei, A Theory of Decentralized Matching Markets Without Transfers, with an Application to Surge Pricing (January 13, 2017). Available at SSRN: https://ssrn.com/abstract=2887732

Alfred Galichon (Contact Author)

NYU, Department of Economics and Courant Institute ( email )

269 Mercer Street, 7th Floor
New York, NY 10011
United States

Yu-Wei Hsieh

USC Dornsife Institute for New Economic Thinking ( email )

3620 S. Vermont Avenue, KAP 364F
Los Angeles, CA 90089-0253
United States

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