Which of the following is an assumption in the two-sided search model about the matching function?
A) The increase in matches from an increase in Q is increasing in Q.
B) The number of matches increases if Q increases but A decreases.
C) The number of matches increases if Q or A decrease.
D) The increase in matches from an increase in A is increasing in A.
E) The increase in matches from an increase in Q is decreasing in Q.

Question

Quizplus · Accepted Answer

In the two-sided search model, the matching function typically assumes diminishing returns to scale, meaning that the increase in matches from an increase in one side of the market (e.g., Q) is decreasing as that side continues to increase.

Which of the Following Is an Assumption in the Two-Sided