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Pricing in Matching Markets

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  • George J. Mailath

    ()
    (Department of Economics, University of Pennsylvania)

  • Andrew Postlewaite

    ()
    (Department of Economics, University of Pennsylvania)

  • Larry Samuelson

    ()
    (Department of Economics, Yale University)

Abstract

Different markets are cleared by different types of prices---a universal price for all buyers and sellers in some markets, seller-specific prices that are uniform across buyers in others, and personalized prices tailored to both the buyer and the seller in yet others. We introduce the notion of premuneration values---the values in the absence of any muneration (payments)---created by the buyer-seller match. We characterize the premuneration values under which uniform-price and personalized-price equilibria agree. In this case, we have efficient allocations, including pre-match investment decisions, without the costs of personalized pricing. We then examine the inefficiencies that arise when the premuneration values preclude the agreement of uniform-price and personalized-price equilibria. We view premuneration valuesas an important consideration in market design.

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Bibliographic Info

Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 10-003.

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Length: 66 pages
Date of creation: 26 Jan 2010
Date of revision:
Handle: RePEc:pen:papers:10-003

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Keywords: Directed search; matching; premuneration value; prematch investments; search;

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References

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  1. Veronica Guerrieri & Robert Shimer & Randall Wright, 2009. "Adverse Selection in Competitive Search Equilibrium," NBER Working Papers 14915, National Bureau of Economic Research, Inc.
  2. Jeremy Bulow & Jonathan Levin, 2005. "Matching and Price Competition," NBER Working Papers 11506, National Bureau of Economic Research, Inc.
  3. Hoppe, Heidrun C. & Moldovanu, Benny & Sela, Aner, 2005. "The Theory of Assortative Matching Based on Costly Signals," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 85, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  4. Sean Nicholson, 2003. "Barriers to Entering Medical Specialties," NBER Working Papers 9649, National Bureau of Economic Research, Inc.
  5. Harold L. Cole & George J. Mailath & Andrew Postlewaite, . "Efficient Non-Contractible Investments in Large Economies," CARESS Working Papres, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences 00-05, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  6. Harold L. Cole & George J. Mailath & Andrew Postlewaite, . ""Efficient Non-Contractible Investments''," CARESS Working Papres, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences 98-13, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  7. Michael Peters, 2010. "Noncontractible Heterogeneity in Directed Search," Econometrica, Econometric Society, Econometric Society, vol. 78(4), pages 1173-1200, 07.
  8. Okuno-Fujiwara, Masahiro & Postlewaite, Andrew & Suzumura, Kotaro, 1990. "Strategic Information Revelation," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 57(1), pages 25-47, January.
  9. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-83, December.
  10. Paul Milgrom & Ilya Segal, 2002. "Envelope Theorems for Arbitrary Choice Sets," Econometrica, Econometric Society, Econometric Society, vol. 70(2), pages 583-601, March.
  11. Mailath, George J, 1987. "Incentive Compatibility in Signaling Games with a Continuum of Types," Econometrica, Econometric Society, Econometric Society, vol. 55(6), pages 1349-65, November.
  12. Harold L. Cole & George J. Mailath & Andrew Postlewaite, 1995. "Incorporating concern for relative wealth into economic models," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Sum, pages 12-21.
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Cited by:
  1. Jan Eeckhout & Philipp Kircher, 2010. "Sorting and decentralized price competition," LSE Research Online Documents on Economics 29705, London School of Economics and Political Science, LSE Library.
  2. Bernardita Vial, 2008. "Competitive Equilibrium and Reputation under Imperfect Public Monitoring," Documentos de Trabajo, Instituto de Economia. Pontificia Universidad Católica de Chile. 327, Instituto de Economia. Pontificia Universidad Católica de Chile..
  3. Masters, Adrian, 2011. "Commitment, advertising and efficiency of two-sided investment in competitive search equilibrium," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 35(7), pages 1017-1031, July.

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