DP18719 Search, Matching, and Online Platforms
Recent technological advances offer solutions to alleviate search and information frictions in matching markets. Consequently, online platforms have emerged as dominant players in modern matching markets. We explore the incentives of an online platform to harness further technological advances through the lens of a dynamic two-sided search model with horizontally differentiated agents and platform-mediated search-and-matching. We find that the platform has incentives to invest in reducing search frictions, but lacks incentives to improve the quality of information it collects and shares about the compatibility of potential partners. Moreover, in equilibrium, reductions in search frictions and improvements in the quality of information both reduce the fees charged by the monopolistic platform and enhance consumer welfare.
