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Costly Capacity Signaling Increases Matching Efficiency: Evidence from a Field Experiment

Published: 17 December 2024 Publication History

Abstract

Buyers pursuing unavailable sellers is a common source of inefficiency in matching markets. We report the results of a field experiment in a large online marketplace where sellers could pay to signal higher capacity via a badge that simply said "available now." All sellers could rent this signal but only randomly treated buyers could see it. We find that sellers who rented this signal were positively selected, treated buyers sought them out more, and as a result matching efficiency increased. We discuss why costly signaling is necessary to facilitate this coordination, and show that mere statements about seller capacity had become uninformative in this marketplace. Two years after the experiment, we show that sellers renting this signal continue receiving substantially higher buyer attention. The full version of the paper can be accessed at https://apostolos-filippas.com/papers/costly-capacity-signalling.pdf.

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  • (undefined)When does Competition and Costly Information Acquisition Lead to a Deadlock?SSRN Electronic Journal10.2139/ssrn.3697165

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cover image ACM Conferences
EC '24: Proceedings of the 25th ACM Conference on Economics and Computation
July 2024
1340 pages
ISBN:9798400707049
DOI:10.1145/3670865
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Association for Computing Machinery

New York, NY, United States

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Published: 17 December 2024

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  1. online marketplaces
  2. e-commerce
  3. mechanism design
  4. field experiments

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  • (undefined)When does Competition and Costly Information Acquisition Lead to a Deadlock?SSRN Electronic Journal10.2139/ssrn.3697165

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