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Price Discrimination in Many-to-Many Matching Markets

Author

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  • Renato Gomes
  • Alessandro Pavan

Abstract

We study second-degree price discrimination in markets where the product traded by the monopolist is access to other agents. We derive necessary and sufficient conditions for the welfareand the profit-maximizing mechanisms to employ a single network or a menu of non-exclusive networks. We characterize the optimal matching schedules under a wide range of preferences, derive implications for prices, and deliver testable predictions relating the structure of the optimal pricing strategies to conditions on the distribution of match qualities. Our analysis sheds light on the distortions associated with the private provision of broadcasting, health insurance and job matching services. JEL Classification Numbers:D82

Suggested Citation

  • Renato Gomes & Alessandro Pavan, 2011. "Price Discrimination in Many-to-Many Matching Markets," Discussion Papers 1540, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    • Handle: RePEc:nwu:cmsems:1540
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    File URL: http://faculty.wcas.northwestern.edu/~apa522/matching_design.pdf
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    References listed on IDEAS

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    Cited by:

    1. Veiga, André, 2018. "A note on how to sell a network good," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 114-126.
    2. Andre Veiga & E. Glen Weyl, 2011. "Multidimensional Heterogeneity and Platform Design," Working Papers 11-33, NET Institute, revised Nov 2011.

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    More about this item

    Keywords

    matching; two-sided markets; networks; adverse selection; incentives; mechanism design;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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