Coarse Matching with Incomplete Information

30 Pages Posted: 14 Feb 2007 Last revised: 16 May 2008

See all articles by Heidrun C. Hoppe-Wewetzer

Heidrun C. Hoppe-Wewetzer

University of Hannover - Department of Economics; and CEPR

Benny Moldovanu

University of Bonn - Chair of Economic Theory II; Centre for Economic Policy Research (CEPR)

Emre Ozdenoren

London Business School; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2008

Abstract

We study two-sided markets with heterogeneous, privately informed agents who gain from being matched with better partners from the other side. Our main results quantify the relative attractiveness of a coarse matching scheme consisting of two classes of agents on each side, in terms of matching surplus (output), an intermediary's revenue, and the agents' welfare (defined by the total surplus minus payments to the intermediary). Following Chao and Wilson (1987) and McAfee (2002), our philosophy is that, if the worst-case scenario under coarse matching is not too bad relative to what is achievable by more complex, finer schemes, a coarse matching scheme will turn out to be preferable once the various transaction costs associated with fine schemes are taken into account. Similarly, coarse matching schemes can be significantly better than completely random matching, requiring only a minimal amount of information.

Suggested Citation

Hoppe-Wewetzer, Heidrun C. and Moldovanu, Benny and Ozdenoren, Emre, Coarse Matching with Incomplete Information (May 1, 2008). Available at SSRN: https://ssrn.com/abstract=963048 or http://dx.doi.org/10.2139/ssrn.963048

Heidrun C. Hoppe-Wewetzer (Contact Author)

University of Hannover - Department of Economics; and CEPR ( email )

Koenigsworther Platz 1
30167 Hannover
Germany

HOME PAGE: http://www.mik.uni-hannover.de

Benny Moldovanu

University of Bonn - Chair of Economic Theory II ( email )

Lennestrasse 37
53113 Bonn
Germany
+49 228 736395 (Phone)
+49 228 737940 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Emre Ozdenoren

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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