Matching & Information Provision in Two-Sided Markets

Abstract

A platform offers an environment where heterogenous buyers and sellers have one opportunity to meet a partner and form a match; no match is feasible outside the environment. We evaluate and compare the profit maximizing and the surplus maximizing platforms. There are two important features: buyers and sellers only observe (inside the environment) a noise of their partner's type and do not observe their own noisy signal, and the platform can only charge a fixed (but possibly different) access fee to buyers and sellers. The platform do not run the match, but influences the matching equilibrium through the effect on the probability of being matched, and through the expected type of buyers and sellers willing to participate. We compute and interpret the platform's optimal pricing rule under the light of the two-sided market literature, and show which matching equilibrium emerges under several model's primitives. Finally, we show the profit maximizing platform overprovides information compared to the benchmark case.