Matching Supply and Demand with Mismatch-Sensitive Players

43 Pages Posted: 9 Nov 2021 Last revised: 6 Nov 2021

See all articles by Mingliu Chen

Mingliu Chen

University of Texas at Dallas - Naveen Jindal School of Management

Peng Sun

Duke University - Fuqua School of Business

Zhixi Wan

The University of Hong Kong - Faculty of Business and Economics

Date Written: September 23, 2019

Abstract

We study matching over time with short- and long-lived players who are very sensitive to mismatch. To characterize the mismatch, we model players' preferences as uniformly distributed on a circle, so the mismatch between two players is characterized by the one-dimensional circular angle between them. This framework allows us to capture matching processes in applications ranging from ride sharing to job hunting. Our analytical framework relies on threshold matching policies. If the matching process is controlled by a central planner (e.g. an online matching platform), the matching threshold reflects the trade-off between matching rate and matching quality. We further compare the centralized system with decentralized systems, where players choose their matching partners. We find that matching controlled by either side of the market may achieve optimal or near optimal social welfare, but have great impact on welfare allocation. In particular, letting long-lived players choose their matching partner leaves short-lived players with zero surplus. Moreover, we extend our model with player heterogeneity. Letting long-lived players choose their matching partner leads to better social welfare when the market of short-lived players is thick and the level of heterogeneity is significant. Otherwise, letting short-lived players choose matching partners is better.

Keywords: Matching, Preferences of Players, Queneing Theory

JEL Classification: C61, D40, D61

Suggested Citation

Chen, Mingliu and Sun, Peng and Wan, Zhixi, Matching Supply and Demand with Mismatch-Sensitive Players (September 23, 2019). Available at SSRN: https://ssrn.com/abstract=3458673 or http://dx.doi.org/10.2139/ssrn.3458673

Mingliu Chen (Contact Author)

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

Peng Sun

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

Zhixi Wan

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

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