INCENTIVE-CONSISTENT MATCHING PROCESSES FOR PROBLEMS WITH EX-ANTE PRICING

In a non-stationary matching problem sellers can compete for potential trading partners by making ex ante pprice offers publicly before the matching process occurs in each period. This paper introduces the concept of an incentive-consistent matching technology in which buyers have no incentive to modify the allocation generated by the matching technology when there is a price deviation. It is shown that when the matching technology is incentive-consistent all trades must occur at prices close to the Walrasian price when transactions costs are small.