Quick or cheap? Breaking points in dynamic markets

Panayotis Mertikopoulos (1, 2) , Heinrich Nax (3) , Bary Pradelski (1)

1 POLARIS - Performance analysis and optimization of LARge Infrastructures and Systems
2 Criteo AI Lab
3 ETH Zürich - Eidgenössische Technische Hochschule - Swiss Federal Institute of Technology [Zürich]

We examine two-sided markets where players arrive stochastically over time and are drawn from a continuum of types. The cost of matching a client and provider varies, so a social planner is faced with two contending objectives: a) to reduce players' waiting time before getting matched; and b) to form efficient pairs in order to reduce matching costs. We show that such markets are characterized by a quick or cheap dilemma: Under a large class of distributional assumptions, there is no 'free lunch', i.e., there exists no clearing schedule that is simultaneously optimal along both objectives. We further identify a unique breaking point signifying a stark reduction in matching cost contrasted by an increase in waiting time. Generalizing this model, we identify two regimes: one, where no free lunch exists; the other, where a window of opportunity opens to achieve a free lunch. Remarkably, greedy scheduling is never optimal in this setting.

Domaines: Optimisation et contrôle [math.OC]

Panayotis Mertikopoulos, Heinrich Nax, Bary Pradelski. Quick or cheap? Breaking points in dynamic markets. EC 2020 - 21st ACM Conference on Economics and Computation, Jul 2020, Budapest, Hungary. pp.1-32. ⟨hal-03043688⟩