How (Not) to Eat a Hot Potato

34 Pages Posted: 29 Mar 2021

See all articles by Willemien Kets

Willemien Kets

University of Oxford - Department of Economics

Wouter Kager

University of Amsterdam

Alvaro Sandroni

University of Pennsylvania - Department of Economics; Northwestern University - Kellogg School of Management

Date Written: March 6, 2020

Abstract

We consider a dynamic matching problem where players are repeatedly assignedtasks and can choose whether to accept or reject them. Players prefer to avoidcertain tasks (“hot potatoes”) while other tasks give a positive payoff (“sweet pota-toes”). There are frictions in the matching process in that players may not bematched to desirable tasks even if one is available. Both under the optimal mecha-nism and in decentralized settings, players may accept hot potatoes if this reducesfrictions in the matching process. We quantify the welfare loss due to matchingfrictions and show that, unlike losses due to more conventional frictions, it does notvanish when the cost of handling hot potatoes grows large.

Suggested Citation

Kets, Willemien and Kager, Wouter and Sandroni, Alvaro, How (Not) to Eat a Hot Potato (March 6, 2020). Available at SSRN: https://ssrn.com/abstract=3796191 or http://dx.doi.org/10.2139/ssrn.3796191

Willemien Kets (Contact Author)

University of Oxford - Department of Economics ( email )

10 Manor Rd
Oxford, OX1 3UQ
United Kingdom

HOME PAGE: http://wkets.org

Wouter Kager

University of Amsterdam ( email )

Spui 21
Amsterdam, 1018 WB
Netherlands

Alvaro Sandroni

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-5461 (Phone)
847-467-1220 (Fax)

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