Price Discrimination and Efficient Matching
AbstractThis paper considers the problem of a monopoly matchmaker that uses a schedule of entrance fees to sort different types of agents on the two sides of a matching market into exclusive meeting places, where agents randomly form pairwise matches. We make the standard assumption that the match value function exhibits complementarities, so that matching types at equal percentiles maximizes total match value and is efficient. We provide necessary and sufficient conditions for the revenue-maximizing sorting to be efficient. These conditions require the match value function, modified to incorporate the incentive cost of eliciting private type information, to exhibit complementarities along the efficient path of matching types at equal percentiles.
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Bibliographic InfoPaper provided by Vancouver School of Economics in its series Microeconomics.ca working papers with number damiano-05-03-21-12-21-58.
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Date of creation: 21 Mar 2005
Date of revision: 22 Mar 2005
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- NEP-ALL-2005-04-03 (All new papers)
- NEP-FMK-2005-04-03 (Financial Markets)
- NEP-IND-2005-04-03 (Industrial Organization)
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- Lones Smith, 2006. "The Marriage Model with Search Frictions," Journal of Political Economy, University of Chicago Press, vol. 114(6), pages 1124-1146, December.
- Damiano, Ettore & Li, Hao & Suen, Wing, 2004.
"Unraveling of Dynamic Sorting,"
Microeconomics.ca working papers
damiano-04-08-11-03-02-02, Vancouver School of Economics, revised 11 Aug 2004.
- BLOCH, Francis & RYDER, Harl, 1994.
"Two-Sided Search, Marriages and Matchmakers,"
CORE Discussion Papers
1994028, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Inderst, Roman, 2001. "Screening in a Matching Market," Review of Economic Studies, Wiley Blackwell, vol. 68(4), pages 849-68, October.
- Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
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