Price discrimination and efficient matching
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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Volume (Year): 30 (2007)
Issue (Month): 2 (February)
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References listed on IDEAS
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- Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
- Ettore Damiano & Hao Li, 2004.
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- BLOCH, Francis & RYDER, Harl, 1994.
"Two-Sided Search, Marriages and Matchmakers,"
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1994028, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Roman Inderst, 2001. "Screening in a Matching Market," Review of Economic Studies, Oxford University Press, vol. 68(4), pages 849-868.
- Lones Smith, 2006. "The Marriage Model with Search Frictions," Journal of Political Economy, University of Chicago Press, vol. 114(6), pages 1124-1146, December.
- Ettore Damiano & Hao Li & Wing Suen, 2005.
"Unravelling of Dynamic Sorting,"
Review of Economic Studies,
Oxford University Press, vol. 72(4), pages 1057-1076.
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