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Many-to-many matching and price discrimination

Author

Listed:
  • Gomes, Renato

    (Toulouse School of Economics (CNRS-GREMAQ))

  • Pavan, Alessandro

    (Department of Economics, Northwestern University)

Abstract

We study centralized many-to-many matching in markets where agents have private information about (vertical) characteristics that determine match values. Our analysis reveals how matching patterns reflect cross-subsidization between sides. Agents are endogenously partitioned into consumers and inputs. At the optimum, the costs of procuring agents-inputs are compensated by the gains from agents-consumers. We show how such cross-subsidization can be achieved through matching rules that have a simple threshold structure, and deliver testable predictions relating the optimal price schedules to the distribution of the agents' characteristics. The analysis sheds light on the practice of large matching intermediaries, such as media and business-to-business platforms, advertising exchanges, and commercial lobbying firms.

Suggested Citation

  • Gomes, Renato & Pavan, Alessandro, 2016. "Many-to-many matching and price discrimination," Theoretical Economics, Econometric Society, vol. 11(3), September.
  • Handle: RePEc:the:publsh:1904
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    More about this item

    Keywords

    Vertical matching markets; many-to-many matching; asymmetric information; mechanism design; cross-subsidization;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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