Search Frictions, Sorting, and Matching in Two-Sided Markets

Search Frictions, Sorting, and Matching in Two-Sided Markets
Author: Hyesung Yoo
Publisher:
Total Pages: 0
Release: 2023
Genre:
ISBN:

This paper studies the impact of friction and preferences on match formation in two-sided markets. Because every agent has private information about their preferences for potential matches' characteristics, forming a match based on mutual compatibility requires extensive costly search. We use field experiment data from an online dating platform to better understand the relative impact of search cost and preference on match outcomes. During the field experiment, randomly selected users are provided information about the preferences of their potential partners that can only be obtained through costly search otherwise. We find evidence suggesting that reducing frictions through this information provision leads to less sorting among matched couples in terms of their characteristics. This is because a user often assesses the match probability with a potential partner based on the similarity between their respective characteristics. The information provision allows a user to assess the match probability more accurately using the potential partner's preference rather than characteristics. Consequently, it encourages users to initiate contact with those who are more likely to match despite their characteristics differences, leading to less sorting among matched couples. To investigate the relative contribution of frictions and preferences on assortative matching, we develop and estimate a model that incorporates frictions and preference heterogeneity across users. Our estimation results reveal that frictions play a significant role in shaping matching outcomes. Using model estimates, we simulate matches under the frictionless Gale-Shapley protocol, and we find that removing frictions leads to significantly less sorting between couples. We also find that frictions in our platform lead to a significant reduction in efficiency. These results highlight the importance of platform designs that aim to reduce frictions. More importantly, with one-third of the marriages in the U.S. marriages originating from online encounters, this paper shows how the design of an online platform can contribute to diversity in the marriage market.

Online and Matching-Based Market Design

Online and Matching-Based Market Design
Author: Federico Echenique
Publisher: Cambridge University Press
Total Pages: 722
Release: 2023-04-30
Genre: Computers
ISBN: 1108935052

The rich, multi-faceted and multi-disciplinary field of matching-based market design is an active and important one due to its highly successful applications with economic and sociological impact. Its home is economics, but with intimate connections to algorithm design and operations research. With chapters contributed by over fifty top researchers from all three disciplines, this volume is unique in its breadth and depth, while still being a cohesive and unified picture of the field, suitable for the uninitiated as well as the expert. It explains the dominant ideas from computer science and economics underlying the most important results on market design and introduces the main algorithmic questions and combinatorial structures. Methodologies and applications from both the pre-Internet and post-Internet eras are covered in detail. Key chapters discuss the basic notions of efficiency, fairness and incentives, and the way market design seeks solutions guided by normative criteria borrowed from social choice theory.

An Empirical Model of Wage Dispersion with Sorting

An Empirical Model of Wage Dispersion with Sorting
Author: Jesper Bagger
Publisher:
Total Pages:
Release: 2014
Genre: Economics
ISBN:

This paper studies wage dispersion in an equilibrium on-the-job-search model with endogenous search intensity. Workers differ in their permanent skill level and firms differ with respect to productivity. Positive (negative) sorting results if the match production function is supermodular (submodular). The model is estimated on Danish matched employer-employee data. We find evidence of positive assortative matching. In the estimated equilibrium match distribution, the correlation between worker skill and firm productivity is 0.12. The assortative matching has a substantial impact on wage dispersion. We decompose wage variation into four sources: Worker heterogeneity, firm heterogeneity, frictions, and sorting. Worker heterogeneity contributes 51% of the variation, firm heterogeneity contributes 11%, frictions 23%, and finally sorting contributes 15%. We measure the output loss due to mismatch by asking how much greater output would be if the estimated population of matches were perfectly positively assorted. In this case, output would increase by 7.7%.

Wage Dispersion

Wage Dispersion
Author: Dale Mortensen
Publisher: MIT Press
Total Pages: 170
Release: 2003
Genre: Business & Economics
ISBN: 9780262633192

A theoretical and empirical examination of wage differentials findsthat traditional theories of competition do not explain why workers with identical skills are paid differently.

Designing Search

Designing Search
Author: Greg Nudelman
Publisher: John Wiley & Sons
Total Pages: 328
Release: 2011-05-09
Genre: Computers
ISBN: 1118109953

Best practices, practical advice, and design ideas for successful ecommerce search A glaring gap has existed in the market for a resource that offers a comprehensive, actionable design patterns and design strategies for ecommerce search—but no longer. With this invaluable book, user experience designer and user researcher Greg Nudelman shares his years of experience working on popular ecommerce sites as he tackles even the most difficult ecommerce search design problems. Nudelman helps you create highly effective and intuitive ecommerce search design solutions and he takes a unique forward-thinking look at trends such as integrating searching with browsing to create a single-finding user interface. Offers much-needed insight on how to create ecommerce search experiences that truly benefit online shoppers Juxtaposes examples of common design pitfalls against examples of highly effective ecommerce search design solutions Presents comprehensive guidance on ecommerce search design strategies for the Web, mobile phone applications, and new tablet devices Shares the author's years of unique experience working with ecommerce from the perspective of the user’s experience Designing ecommerce Search is mandatory reading if you are interested in orchestrating successful ecommerce search strategies.