Cream Skimming and Information Design in Matching Markets

Abstract

Short-lived buyers arrive to a platform over time and randomly match with sellers. The sellers stay at the platform and decide whether to accept incoming requests. The platform designs what buyer information the sellers observe before deciding to form a match. We show full information disclosure leads to a market failure because of excessive rejections by the sellers. If sellers are homogeneous, then coarse information policies are able to restore efficiency. If sellers are heterogeneous, then simple censorship policies are often constrained efficient as shown by a method of calculus of variations. (JEL C78, D82, D83)