Equivalence of canonical matching models. (English) Zbl 1452.91220
Summary: This paper offers expected revenue and pricing equivalence results for canonical matching models. The equivalence of these models is centered on the assumption that there are large numbers of buyers and sellers, and the contact decisions of buyers to sellers are made independently. Therefore, the distribution of buyers to sellers is approximated by the Poisson distribution. The list of canonical matching models includes the models developed by K. Burdett and K. L. Judd [Econometrica 51, 955–969 (1983; Zbl 0521.90022)], R. Shimer [“The assignment of workers to jobs in an economy with coordination frictions”, J. Polit. Econ. 113, No. 5, 996–1025 (2005; doi:10.1086/444551)], and R. P. McAfee [Econometrica 61, No. 6, 1281–1312 (1993; Zbl 0791.90018)]. In the Burdett and Judd model, buyers post prices and the equilibrium features price dispersion because identical buyers play mixed strategies. In the Shimer model, sellers post a vector of prices corresponding to different buyer types. In equilibrium, all identical buyers pay the same price. In the McAfee model, equilibrium pricing is determined by simple second price auctions. McAfee’s model also features price dispersion because the number of bidders at each auction is stochastic.
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