Open AccessOptimal dynamic matching
Author(s) -
Baccara Mariagiovanna,
Lee SangMok,
Yariv Leeat
Publication year - 2020
Publication title -
theoretical economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.404
H-Index - 32
eISSN - 1555-7561
pISSN - 1933-6837
DOI - 10.3982/te3740
Subject(s) - matching (statistics) , queue , computer science , welfare , microeconomics , stock (firearms) , gains from trade , quality (philosophy) , economics , mathematics , statistics , computer network , mechanical engineering , philosophy , epistemology , engineering , market economy
We study a dynamic matching environment where individuals arrive sequentially. There is a trade‐off between waiting for a thicker market, allowing for higher‐quality matches, and minimizing agents' waiting costs. The optimal mechanism cumulates a stock of incongruent pairs up to a threshold and matches all others in an assortative fashion instantaneously. In discretionary settings, a similar protocol ensues in equilibrium, but expected queues are inefficiently long. We quantify the welfare gain from centralization, which can be substantial, even for low waiting costs. We also evaluate welfare improvements generated by alternative priority protocols.