When does Competition and Costly Information Acquisition Lead to a Deadlock?

27 Pages Posted: 12 Nov 2020

See all articles by Nicole Immorlica

Nicole Immorlica

Microsoft Research

Yash Kanoria

Columbia University - Columbia Business School, Decision Risk and Operations

Jiaqi Lu

The Chinese University of Hong Kong, Shenzhen

Date Written: September 22, 2020

Abstract

We study a matching market with N agents who compete over M = αN opportunities. Agents must perform a costly inspection to verify compatibility prior to matching, and are willing to inspect their current favorite opportunity only if, should they find it compatible, they will be guaranteed a match. We ask when, in large random markets, will information deadlocks arise, i.e., in which markets will a constant fraction of agents get stuck waiting for a guaranteed inspection to become available. We prove, using the machinery of message passing and density evolution from statistical physics, that the existence of an information deadlock is governed by the opportunity to agent ratio α. Numerical evidence shows a phase transition from the information deadlock regime to a deadlock-free regime (where a vanishingly small fraction of agents are stuck waiting) as we gradually increase α.

Keywords: matching markets, search frictions, information deadlock, message passing algorithm, phase transition

Suggested Citation

Immorlica, Nicole and Kanoria, Yash and Lu, Jiaqi, When does Competition and Costly Information Acquisition Lead to a Deadlock? (September 22, 2020). Available at SSRN: https://ssrn.com/abstract=3697165 or http://dx.doi.org/10.2139/ssrn.3697165

Nicole Immorlica

Microsoft Research ( email )

One Memorial Drive, 14th Floor
Cambridge, MA 02142
United States

Yash Kanoria

Columbia University - Columbia Business School, Decision Risk and Operations ( email )

New York, NY
United States

Jiaqi Lu (Contact Author)

The Chinese University of Hong Kong, Shenzhen ( email )

HOME PAGE: http://https://www.sites.google.com/view/jiaqilu

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