Making Marketplaces Safe: Dominant Individual Rationality and Applications to Market Design

Benjamin N. Roth; Ran I. Shorrer

Article | Management Science | Forthcoming

Making Marketplaces Safe: Dominant Individual Rationality and Applications to Market Design

Abstract

Often market designers cannot force agents to join a marketplace rather than using pre-existing institutions. We propose a new desideratum for marketplace design that guarantees the safety of participation: Dominant Individual Rationality (DIR). A marketplace is DIR if every pre-existing strategy is weakly dominated by some strategy within the marketplace. We study applications to the design of labor markets and the sharing economy. We also provide a general construction to achieve approximate DIR across a wide range of marketplace designs.

Keywords: Dominant Individual Rationality; Market Design; Safety;

Format: Print

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Citation:

Roth, Benjamin N., and Ran I. Shorrer. "Making Marketplaces Safe: Dominant Individual Rationality and Applications to Market Design." Management Science (forthcoming).

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Making Marketplaces Safe: Dominant Individual Rationality and Applications to Market Design

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