Market Thickness and Matching (In)efficiency: Evidence from a Quasi-Experiment

Serguei Netessine, Operations, Information and Decisions, The Wharton School; and Jun Li, Ross School of Business

Abstract: Market thickness is a key parameter that can make or break a platform’s business model. Thicker markets can offer more opportunities for participants to meet and higher chances that a potential match would exist. However, they can also be vulnerable to potential search frictions. In this paper, using data from an online peer-to-peer holiday rental platform, we aim to identify and measure the causal impact of market thickness on matching efficiencies. In particular, we exploit an exogenous shock to market size caused by a one-time migration of listings from other platforms, which gave rise to a quasi-experimental design.

Michelle Eckert is Marketing and Communications Coordinator for the Mack Institute, where she works to engage students, researchers, and corporate partners in opportunities for collaboration. Michelle received her B.A. in Art from Valparaiso University in 2007. Her background includes two AmeriCorps terms of service working to teach mathematics, computer literacy, and job readiness skills to out-of-school youth in Philadelphia, focusing particularly on promoting access to post-secondary education.