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Competing Matchmaking

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Author Info
Ettore Damiano
Li Hao

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Abstract

We study how matchmakers use prices to sort heterogeneous participants into competing matching markets and how equilibrium outcomes compare with monopoly in terms of prices, matching market structure, and sorting efficiency under the assumption of complementarity in the match value function. The role of prices to facilitate sorting is compromised by the need to survive price competition. We show that price competition leads to a high-quality market that is insufficiently exclusive. As a result, the duopolistic outcome can be less efficient in sorting than the monopoly outcome in terms of total match value in spite of servicing more participants. (JEL: C7, D4) (c) 2008 by the European Economic Association.

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Article provided by MIT Press in its journal Journal of the European Economic Association.

Volume (Year): 6 (2008)
Issue (Month): 4 (06)
Pages: 789-818
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Handle: RePEc:tpr:jeurec:v:6:y:2008:i:4:p:789-818

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Find related papers by JEL classification:
C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
D4 - Microeconomics - - Market Structure and Pricing

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Fujita, Masahisa, 1988. "A monopolistic competition model of spatial agglomeration : Differentiated product approach," Regional Science and Urban Economics, Elsevier, vol. 18(1), pages 87-124, February. [Downloadable!] (restricted)
  2. Caillaud, Bernard & Jullien, Bruno, 2001. "Competing cybermediaries," European Economic Review, Elsevier, vol. 45(4-6), pages 797-808, May. [Downloadable!] (restricted)
  3. Attila Ambrus & Rossella Argenziano, 2004. "Network Markets and Consumers Coordination," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  4. Rochet, Jean-Charles & Tirole, Jean, 2003. "Platform Competition in Two-Sided Markets," IDEI Working Papers 152, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
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  5. Caillaud, Bernard & Jullien, Bruno, 2003. " Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-28, Summer.
  6. Banks, Jeffrey S & Sobel, Joel, 1987. "Equilibrium Selection in Signaling Games," Econometrica, Econometric Society, vol. 55(3), pages 647-61, May. [Downloadable!] (restricted)
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  7. Glenn Ellison & Drew Fudenberg, 2003. "Knife-Edge or Plateau: When do Market Models Tip?," Levine's Bibliography 506439000000000098, UCLA Department of Economics. [Downloadable!]
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  8. Damiano, Ettore & Li, Hao, 2005. "Price Discrimination and Efficient Matching," Micro Theory Working Papers damiano-05-03-21-12-21-58, Microeconomics.ca Website, revised 22 Mar 2005. [Downloadable!]
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  9. Philip J. Reny, 1999. "On the Existence of Pure and Mixed Strategy Nash Equilibria in Discontinuous Games," Econometrica, Econometric Society, vol. 67(5), pages 1029-1056, September.
  10. Glenn Ellison & Drew Fudenberg & Markus Mobius, 2003. "Competing Auctions," Levine's Bibliography 506439000000000092, UCLA Department of Economics. [Downloadable!]
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  11. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June. [Downloadable!] (restricted)
  12. Kohlberg, Elon & Mertens, Jean-Francois, 1986. "On the Strategic Stability of Equilibria," Econometrica, Econometric Society, vol. 54(5), pages 1003-37, September. [Downloadable!] (restricted)
  13. Mark Armstrong, 2005. "Competition in Two-Sided Markets," Industrial Organization 0505009, EconWPA. [Downloadable!]
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  14. An, Mark Yuying, 1998. "Logconcavity versus Logconvexity: A Complete Characterization," Journal of Economic Theory, Elsevier, vol. 80(2), pages 350-369, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. María Fernanda Viecens, 2006. "Two-Sided Platforms With Endogenous Quality Differentiation," Economics Working Papers we061204, Universidad Carlos III, Departamento de Economía. [Downloadable!]
  2. Attila Ambrus & Rosella Argenziano, 2004. "Network Markets and Consumer Coordination," IEHAS Discussion Papers 0423, Institute of Economics, Hungarian Academy of Sciences. [Downloadable!]
    Other versions:
  3. Simon Board, 2007. "Monopolistic Group Design with Peer Effects," Working Papers tecipa-276, University of Toronto, Department of Economics. [Downloadable!]
    Other versions:
  4. Kurucu, Gokce, 2007. "Negative Network Externalities in Two-Sided Markets: A Competition Approach," MPRA Paper 9746, University Library of Munich, Germany. [Downloadable!]
  5. Josh Lerner & Jean Tirole, 2004. "A Model of Forum Shopping, with Special Reference to Standard Setting Organizations," NBER Working Papers 10664, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Damiano, Ettore & Li, Hao & Suen, Wing, 2005. "First in village or second in Rome?," Micro Theory Working Papers damiano-05-01-25-10-14-13, Microeconomics.ca Website, revised 26 Jan 2005. [Downloadable!]
    Other versions:
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This page was last updated on 2009-11-16.

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