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Quick or cheap? Breaking points in dynamic markets

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Abstract

We examine two-sided markets where players arrive stochastically over time and are drawn from a continuum of types. The cost of matching a client and provider varies, so a social planner is faced with two contending objectives: a) to reduce players' waiting time before getting matched; and b) to form efficient pairs in order to reduce matching costs. We show that such markets are characterized by a quick or cheap dilemma: Under a large class of distributional assumptions, there is no 'free lunch', i.e., there exists no clearing schedule that is simultaneously optimal along both objectives. We further identify a unique breaking point signifying a stark reduction in matching cost contrasted by an increase in waiting time. Generalizing this model, we identify two regimes: one, where no free lunch exists; the other, where a window of opportunity opens to achieve a free lunch. Remarkably, greedy scheduling is never optimal in this setting.
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Dates and versions

hal-03043688 , version 1 (07-12-2020)

Identifiers

  • HAL Id : hal-03043688 , version 1

Cite

Panayotis Mertikopoulos, Heinrich Nax, Bary Pradelski. Quick or cheap? Breaking points in dynamic markets. EC 2020 - 21st ACM Conference on Economics and Computation, Jul 2020, Budapest, Hungary. pp.1-32. ⟨hal-03043688⟩
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