American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Search Design and Broad Matching
American Economic Review
vol. 106,
no. 3, March 2016
(pp. 563–86)
Abstract
We study decentralized mechanisms for allocating firms into search pools. The pools are created in response to noisy preference signals provided by consumers, who then browse the pools via costly random sequential search. Surplus-maximizing search pools are implementable in symmetric Nash equilibrium. Full extraction of the maximal surplus is implementable if and only if the distribution of consumer types satisfies a set of simple inequalities, which involve the relative fractions of consumers who like different products and the Bhattacharyya coefficient of similarity between their conditional signal distributions. The optimal mechanism can be simulated by a keyword auction with broad matching. (JEL C78, D44, D82)Citation
Eliaz, Kfir, and Ran Spiegler. 2016. "Search Design and Broad Matching." American Economic Review, 106 (3): 563–86. DOI: 10.1257/aer.20150076Additional Materials
JEL Classification
- C78 Bargaining Theory; Matching Theory
- D44 Auctions
- D82 Asymmetric and Private Information; Mechanism Design