Buyer Signaling Improves Matching: Evidence from a Field Experiment

58 Pages Posted: 24 Sep 2018 Last revised: 20 Jan 2019

See all articles by John J. Horton

John J. Horton

New York University (NYU) - Department of Information, Operations, and Management Sciences

Ramesh Johari

Stanford University

Date Written: October 28, 2018

Abstract

In a large online market, buyers were given the opportunity to signal their relative preferences over price and quality—first experimentally, then later as the default experience in the market. The possibility of signaling caused substantial sorting by sellers to buyers of the right “type.” However, sellers clearly tailored their bids to the type of buyer they faced, bidding up against buyers with a high revealed willingness to pay. Despite this markup, a separating equilibrium was sustained over time, post-experiment, suggesting buyers found revelation incen- tive compatible. We find evidence that informative signaling improved both matching efficiency and match quality.

Keywords: signaling, matching, market design, experimentation

Suggested Citation

Horton, John J. and Johari, Ramesh, Buyer Signaling Improves Matching: Evidence from a Field Experiment (October 28, 2018). Available at SSRN: https://ssrn.com/abstract=3245704 or http://dx.doi.org/10.2139/ssrn.3245704

John J. Horton (Contact Author)

New York University (NYU) - Department of Information, Operations, and Management Sciences ( email )

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Ramesh Johari

Stanford University ( email )

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