On the importance of uniform sharing rules for efficient matching

Deniz Dizdar, Benny Moldovanu

Research output: Contribution to journalArticlepeer-review

Abstract

The paper provides 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.

Original languageEnglish
Pages (from-to)106-123
Number of pages18
JournalJournal of Economic Theory
Volume165
DOIs
StatePublished - 1 Sep 2016
Externally publishedYes

Keywords

  • Interdependent values
  • Matching
  • Multi-dimensional attributes
  • Premuneration values
  • Surplus division

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