Eventi del
31 2021 12:30 - 13:45
Webinar
Applied Microeconomics
Addressing Congestion in Two-Sided Markets: A Mutual Popularity Ranking Approach
Rafael Lalive and Camille Terrier (University of Lausanne)
This paper estimates costs and benefits of congestion in two-sided markets, and designs a mutual popularity ranking that helps reduce congestion in a way that benefits both sides of the market. Using data from a dating platform and exogenous variations in the number of participants, we show that, in two-sided markets, congestion has an opposite effect on both sides of the market: It harms the congested side (men in our case) through tougher competition. In contrast, congestion benefits the uncongested side (women in our case) by increasing their choice set. This asymmetric effect raises a natural question: Is there a way to reduce congestion without harming one side of the market? The second part of the paper builds on an intuitive answer: Preventing sources of congestion (“likes" from men in our case) that have no chance of reaching a match would reduce congestion while improving efficiency on both sides of the market. To identify likely and unlikely matches, we design a new popularity ranking for each side of the market. Based on Eigenvector centrality, this ranking exploits interactions between both sides of the market to build a revealed preferences measure of popularity. We then use data on interactions between men and women to estimate their popularity ranking. Our results reveal that mutual popularity strongly predicts the probability that a “like” results in a match. We show that “likes" from men who are significantly less popular than the woman they like have a close-to-zero individual benefit, but a significant congestion cost for other men in the market.
for further information please contact sara.picciallo@unibocconi.it