Assortative Matching with Private Information
2024-01-08 10:20:40
We study matching between heterogeneous agents when their types are private information. Competing platforms post terms of trade. Agents with private information choose where to search and form matches. Positively assortative matching arises when each market attracts only one type of agent. We characterize an equilibrium with positively assortative matching when one exists, and provide sufficient conditions to ensure that matching is positively assortative in a limit with a vanishing role for platforms. When more desirable partners have a higher willingness-to-pay for matches, they pay high fees to platforms to avoid less desirable types. When more desirable partners have a lower willingness-to-pay, they match at a low rate to keep out less desirable types.