On the Importance of Uniform Sharing Rules for Efficient Matching

23 Pages Posted: 26 Jun 2015

See all articles by Deniz Dizdar

Deniz Dizdar

University of Montreal - Department of Economics

Benny Moldovanu

University of Bonn - Chair of Economic Theory II; Centre for Economic Policy Research (CEPR)

Date Written: June 24, 2015

Abstract

The paper aims to provide a possible explanation for the occurrence of uniform, fixed-proportion rules for sharing surplus in two-sided markets. We study a two-sided matching model with transferable utility where agents are characterized by privately known, multi-dimensional attributes that jointly determine the surplus of each potential partnership. We ask the following question: for what divisions of surplus within matched pairs is it possible to implement the efficient (surplus-maximizing) matching? Our main result shows that the only robust rules compatible with efficient matching are those that divide realized surplus in a fixed proportion, independently of the attributes of the pair's members: each agent must expect to get the same fixed percentage of surplus in every conceivable match. A more permissive result is obtained for one-dimensional attributes and supermodular surplus functions.

Keywords: Matching, surplus division, premuneration values, interdependent values, multi-dimensional attributes

Suggested Citation

Dizdar, Deniz and Moldovanu, Benny, On the Importance of Uniform Sharing Rules for Efficient Matching (June 24, 2015). Available at SSRN: https://ssrn.com/abstract=2622664 or http://dx.doi.org/10.2139/ssrn.2622664

Deniz Dizdar (Contact Author)

University of Montreal - Department of Economics ( email )

C.P. 6128, succursale Centre-Ville
Montreal, Quebec H3C 3J7
Canada

Benny Moldovanu

University of Bonn - Chair of Economic Theory II ( email )

Lennestrasse 37
53113 Bonn
Germany
+49 228 736395 (Phone)
+49 228 737940 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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