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Price Discrimination and Efficient Matching

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  • Damiano, Ettore
  • Li, Hao

Abstract

This 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 Info

Paper 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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Length: 0 pages
Date of creation: 21 Mar 2005
Date of revision: 22 Mar 2005
Handle: RePEc:ubc:pmicro:damiano-05-03-21-12-21-58

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  1. Inderst, Roman, 2001. "Screening in a Matching Market," Review of Economic Studies, Wiley Blackwell, vol. 68(4), pages 849-68, October.
  2. Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
  3. 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).
  4. Ettore Damiano & Hao Li & Wing Suen, 2005. "Unravelling of Dynamic Sorting," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 1057-1076.
  5. Lones Smith, 2006. "The Marriage Model with Search Frictions," Journal of Political Economy, University of Chicago Press, vol. 114(6), pages 1124-1146, December.
  6. Ettore Damiano & Hao Li, 2004. "Unraveling of Dynamic Sorting," 2004 Meeting Papers 174, Society for Economic Dynamics.
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