A Theoretical Foundation for Bilateral Matching Mechanisms.

Abstract

This work introduces a rigorous set-theoretic foundation of bilateral matching mechanisms and studies their properties in a systematic manner. By providing a unified framework to study bilateral matching mechanisms, we formalize how different spatial/informational constraints can be implemented via a careful selection of matching mechanisms. In particular, this paper explains why and how various matching mechanisms generate different degrees of information isolation in the economy.Bilateral matching ; Frictions ; Anonymous trading ; Spatial interactions