Conferences at Department of Economics, University of Toronto, Canadian Economic Theory Conference 2022

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Information design in matching markets

Sulagna Dasgupta*

Last modified: 2022-05-19


In the matching or object allocation problem, objects are allocated to agents without monetary transfers, based on agent preferences. However, agents may not always know, a priori, their preferences over the objects, because they do not have enough information. In this context, I try to answer the question: How should a benevolent planner optimally reveal information to the agents to maximize welfare, in an environment where agents have no private information to start with? As a benchmark, I first show that when using any of the standard strategyproof ordinal mechanisms, such as Deferred Acceptance, Serial Dictatorship, Random Priority or Top Trading Cycle, letting each agent know his true ordinal ranking over the objects is almost never a social welfare-maximizing information policy. By way of a partial solution, I then propose a simple signal I call the Object Recommendation (OR) Signal. Under independent agent priors satisfying a mild regularity condition, I show that, when agents' a priori relative preferences over the objects are \say{not too strong}, the OR Signal, used together with any of the aforementioned standard mechanisms, not only maximizes welfare, but achieves first-best, i.e. the unconstrained maximum total ex-ante welfare. 

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