"Pricing and Investments in Matching Markets",Second Version
AbstractDifferent markets are cleared by different types of prices---seller-specific prices that are uniform across buyers in some markets, and personalized prices tailored to the buyer in others. We examine a setting in which buyers and sellers make investments before matching in a competitive market. We introduce the notion of premuneration values---the values to the transacting agents prior to any transfers---created by a buyer-seller match. Personalized price equilibrium outcomes are independent of premuneration values and exhibit inefficiencies only in the event of "coordination failures," while uniform-price equilibria depend on premuneration values and in general feature inefficient investments even without coordination failures. There is thus a trade-off between the costs of personalizing prices and the inefficient investments under uniform prices. We characterize the premuneration values under which uniform-price equilibria similarly exhibit inefficiencies only in the event of coordination failures.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 10-037.
Length: 68 pages
Date of creation: 26 Jan 2010
Date of revision: 30 Nov 2010
Directed search; matching; premuneration value; prematch investments; search;
Find related papers by JEL classification:
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- D41 - Microeconomics - - Market Structure and Pricing - - - Perfect Competition
- D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-11 (All new papers)
- NEP-GTH-2010-12-11 (Game Theory)
- NEP-MIC-2010-12-11 (Microeconomics)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Ed Hopkins (University of Edinburgh) & V. Bhaskar (University College London), 2011.
"Marriage as a Rat Race: Noisy Pre-Marital Investments with Assortative Matching,"
ESE Discussion Papers
210, Edinburgh School of Economics, University of Edinburgh.
- Bhaskar, Venkataraman & Hopkins, Ed, 2011. "Marriage as a Rat Race: Noisy Pre-Marital Investments with Assortative Matching," CEPR Discussion Papers 8529, C.E.P.R. Discussion Papers.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dolly Guarini).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.