Truthtelling in Matching Markets

AuthorJeanne Hagenbach,Thomas Trégouët,Frédéric Koessler
Published date01 October 2017
Date01 October 2017
DOIhttp://doi.org/10.1111/sjoe.12203
Truthtelling in Matching Markets
Jeanne Hagenbach
Ecole Polytechnique – CNRS, FR-91128 Palaiseau, France
jeanne.hagenbach@polytechnique.edu
Fr´
ed´
eric Koessler
Paris School of Economics – CNRS, FR-75014 Paris, France
frederic.koessler@psemail.eu
Thomas Tr´
egou¨
et
Cergy-Pontoise University, FR-95011 Cergy-Pontoise, France
thomas.tregouet@u-cergy.fr
Abstract
We analyze a search and matching model with non-transferable utility and asymmetric
information. Randomly paired agents go through an evaluation phase, at the end of which
they discover each other’s types and choose to match or not. Before deciding to enter
this phase, agents can communicate through cheap talk. We provide conditions for this
communication to be informative, and we examine how it affects agents’ welfare. We show
that communication is Pareto-improving only when the matching is assortative in the absence
of communication and left unchanged by information transmission.
Keywords: Cheap talk; marriage; matching; search
JEL classification:C72; C78; D82; D83; J64
I. Introduction
The use of information and communication technology (ICT) is widespread
in search and matching markets. For instance, traditional matching markets
were among the first popular services on the Internet: the leading dat-
ing web site Match.com opened in 1995; Monster.com, the leading Inter-
net job board, opened in 1994; the real estate web site Homes.com was
launched in 1993. In addition a number of innovating matching services
bloomed because of the widespread adoption of the Internet. Prominent
services include temporary apartment renting (AirBnb), resale web sites
We thank Raicho Bojilov, Regis Renault, the anonymous referees, participants at the 18th
CTN Workshop, the 11th IIOC, the ESEM 2014, and seminar participants at ´
Ecole Poly-
technique, Universit´
e de Cergy-Pontoise, Universit´
e de Paris 1, Columbia University, and
Mannheim University for helpful comments. J. Hagenbach and F. Koessler thank the French
National Research Agency for financial support (ANR, projects DYNAMITE and NET,
respectively). The authors finally thank Jean-Claude Dusse for inspiration.
©The editors of The Scandinavian Journal of Economics 2016.
Scand. J. of Economics 119(4), 882–909, 2017
DOI: 10.1111/sjoe.12203
(eBay, Craigslist, Leboncoin), car pooling (Zimride, Blablacar), peer-to-
peer small jobs’ finder (TaskRabbit), musicians’ finder (BandMix), online
gaming community (Steam), etc. In all these examples, the screening pro-
cess is made easier because participants have access to information about
potential partners at an early stage of the matching process. Ideally, in
search and matching markets, ICT therefore allows us to save time by im-
proving and speeding up the screening process, and, possibly, it improves
the matching.1That said, there are also concerns that the quality of infor-
mation conveyed using ICT is of poor quality,2or that having too many
choices can make decisions more complicated, which could eventually lead
to an inferior matching.
In this paper, we develop a dynamic search and matching model in which
agents have private information about the match quality at the time they
meet. This information can be elicited by going through a time-consuming
and compulsory evaluation phase. Without any form of communication at
the time of meeting, agents lose time in unfruitful evaluation phases when
one or both partners eventually decide to search further. In such a setting,
we study what happens when agents have access to a communication tech-
nology that enables them to transmit information directly at the time of the
meeting.
For communication to be of some effect, it must first and foremost
be informative. However, truthful information revelation is not trivial in
markets where agents communicate about vertical characteristics while all
competing for the “best” partners. In our model, agents might lie about their
types if it allows them to start an evaluation phase with agents who would
otherwise reject them right away. Incentives for truthtelling come from the
fact that such lies are unprofitable if they lead an agent to start evaluation
phases at the end of which he will be rejected. It follows that agents’
incentives to reveal the truth crucially depend on the equilibrium matching
that follows. In our two-type setting, if high-type agents accept low-type
agents, then low-type agents have no interest in lying. On the contrary, in
situations of assortative matching where high-type agents reject low-type
agents, concerns about truthtelling arise. In such cases, we pin down the
conditions, ensuring that high types go on searching if they eventually
discover that their partner is a low-type who lied: high types must be
1In a study conducted by Bughin et al. (2001) for McKinsey&Company,the primar y “sources
of value” from ICT identified by respondents were a “better matching”, “time saved”, and
“raised awareness”.
2This comes from the fact that, most of the time, any information volunteered by participant
is not credible. This is a major concern in online dating, where misrepresentation seems
to be the norm rather than the exception: according to a recent survey conducted by the
Pew Research Center, 54 percent of online daters have felt that “someone else seriously
misrepresented themselves in their profile” (Smith and Duggan, 2013).
J. Hagenbach, F. Koessler, and T. Tre´goue¨ t 883
©The editors of The Scandinavian Journal of Economics 2016.

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