Two-Sided Matching Platforms : Characteristics, Welfare, and Design

I study how a matching platform's design affects users' welfare and probability of matching (outcomes) and the strategic decisions behind such a design. I consider a two-sided matching model in which each agent has a limited number of prospects. An increase in agents' number of prospects has two effects on outcomes: a positive choice effect (the agent might find a more desirable partner) and a negative competition effect (the agent's prospects might find a more desirable alternative). The interaction of the choice and competition effects has significant consequences. For one, agents benefit from platforms with non-negligible frictions and intermediate market scale because such features limit competition. Second, the network effects (the effect on outcomes of the size of each side of the market) may have either sign, depending on the platform's efficiency in generating users' interaction. Finally, a designer can maximize a platform's user base by simultaneously prioritizing the welfare of the longer side of the market and reducing the size gap between sides. I conclude by using my model to explain data from a platform merger and empirically estimate bounds on the resulting change in users' welfare