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Title: Optimal Dynamic Matching

Author(s): Mariagiovanna Baccara, SangMok Lee and Leeat Yariv

Publication Date: June 2018

Keyword(s): Dynamic Matching, market design, mechanism design and Organ Donation

Programme Area(s): Industrial Organization and Labour Economics

Abstract: We study a dynamic matching environment where individuals arrive sequentially. There is a tradeoff 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 transfer schemes, and alternative priority protocols.

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Bibliographic Reference

Baccara, M, Lee, S and Yariv, L. 2018. 'Optimal Dynamic Matching'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12986