Quick or Cheap? Breaking Points in Dynamic Markets

44 Pages Posted: 16 Jan 2020

See all articles by Panayotis Mertikopoulos

Panayotis Mertikopoulos

CNRS

Heinrich H. Nax

ETH Zürich; University of Zurich

Bary Pradelski

CNRS, Université Grenoble Alpes

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Date Written: December 30, 2019

Abstract

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.

Keywords: dynamic matching, online markets, market design

JEL Classification: D47, C78, C60, D80

Suggested Citation

Mertikopoulos, Panayotis and Nax, Heinrich H. and Pradelski, Bary, Quick or Cheap? Breaking Points in Dynamic Markets (December 30, 2019). Available at SSRN: https://ssrn.com/abstract=3511444 or http://dx.doi.org/10.2139/ssrn.3511444

Panayotis Mertikopoulos

CNRS ( email )

France

Heinrich H. Nax

ETH Zürich ( email )

Rämistrasse 101
ZUE F7
Zürich, 8092
Switzerland

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

Bary Pradelski (Contact Author)

CNRS, Université Grenoble Alpes ( email )

Grenoble
France

HOME PAGE: http://cnrs.fr

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