Cream Skimming and Information Design in Matching Markets

Abstract

Short-lived buyers arrive to a platform over time and randomly match with sellers. The sellers stay at the platform and decide whether to accept incoming requests. The platform designs what buyer information the sellers observe before deciding to form a match. We show full information disclosure leads to a market failure because of excessive rejections by the sellers. If sellers are homogeneous, then coarse information policies are able to restore efficiency. If sellers are heterogeneous, then simple censorship policies are often constrained efficient as shown by a method of calculus of variations. (JEL C78, D82, D83)

Censorship as optimal persuasion

“…There is a diverse literature where censorship policies emerge as optimal signals in specific instances of the linear persuasion problem, starting from the prosecutor–judge example, as well as lobbying and product advertising examples, in Kamenica and Gentzkow (2011). Other contexts where censorship is optimal include grading policies (Ostrovsky and Schwarz (2010)), media control (Gehlbach and Sonin (2014), Ginzburg (2019), Gitmez and Molavi (2020)), clinical trials (Kolotilin (2015)), voter persuasion (Alonso and Câmara (2016a,b)), transparency benchmarks (Duffie, Dworczak, and Zhu (2017)), stress tests (Goldstein and Leitner (2018), Orlov, Zryumov, and Skrzypach (2021)), online markets (Romanyuk and Smolin (2019)), attention management (Lipnowski, Mathevet, and Wei (2020), Bloedel and Segal (2021)), quality certification (Zapechelnyuk (2020)), and relational communication (Kolotilin and Li (2021)).…”

Information vs Competition: How Platform Design Affects Profits and Surplus

“…10 See, among others, Ellison and Ellison (2009); Celik (2014); Janssen and Teteryatnikova (2016); Petrikaitė (2018); Jullien and Pavan (2019); Romanyuk and Smolin (2019); Armstrong and Zhou (In Press).…”

‘Information Doesn’t Want to Be Free’: Informational Shocks With Anonymous Online Platforms

“…This is similarly the case in Galeotti and Moraga-González (2009), who focus on non-anonymous platforms. Meanwhile, Romanyuk and Smolin (2019) look specifically at the seller-buyer match: the platform decides how much information to reveal in order to maximise their own profit. In both Anderson and Renault (2009) and Janssen and Teteryatnikova (2016), each firm unilaterally chooses how much information to disclose about their (horizontally differentiated) product and that of their competitor.…”

“…The focus here is on anonymous platforms, a characteristic which, to the best of my knowledge, has not been specifically used in previous analyses. While Celik (2009) utilises anonymous platforms to motivate his work, and employs a similar setting in that goods are horizontally differentiated and the platform does not disclose all the attributes of the good, he focuses on the profit maximising amount of information to disclose, in line with Romanyuk and Smolin (2019).…”