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Competing Matchmaking

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Listed:
  • Ettore Damiano
  • Li Hao

Abstract

We study how matchmakers use prices to sort heterogeneous participants into competing matching markets and how equilibrium outcomes compare with monopoly in terms of prices, matching market structure, and sorting efficiency under the assumption of complementarity in the match value function. The role of prices to facilitate sorting is compromised by the need to survive price competition. We show that price competition leads to a high-quality market that is insufficiently exclusive. As a result, the duopolistic outcome can be less efficient in sorting than the monopoly outcome in terms of total match value in spite of servicing more participants. (JEL: C7, D4) (c) 2008 by the European Economic Association.

Suggested Citation

  • Ettore Damiano & Li Hao, 2008. "Competing Matchmaking," Journal of the European Economic Association, MIT Press, vol. 6(4), pages 789-818, June.
  • Handle: RePEc:tpr:jeurec:v:6:y:2008:i:4:p:789-818
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    References listed on IDEAS

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    1. Karni, Edi & Levin, Dan, 1994. "Social Attributes and Strategic Equilibrium: A Restaurant Pricing Game," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 822-840, August.
    2. Glenn Ellison & Drew Fudenberg, 2003. "Knife-Edge or Plateau: When Do Market Models Tip?," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1249-1278.
    3. Ettore Damiano & Hao Li, 2004. "Unraveling of Dynamic Sorting," Econometric Society 2004 Latin American Meetings 72, Econometric Society.
    4. An, Mark Yuying, 1998. "Logconcavity versus Logconvexity: A Complete Characterization," Journal of Economic Theory, Elsevier, vol. 80(2), pages 350-369, June.
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    7. Ettore Damiano & Hao Li & Wing Suen, 2005. "Unravelling of Dynamic Sorting," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 1057-1076.
    8. Ettore Damiano & Hao Li, 2007. "Price discrimination and efficient matching," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 30(2), pages 243-263, February.
    9. de Bartolome, Charles A M, 1990. "Equilibrium and Inefficiency in a Community Model with Peer Group Effects," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 110-133, February.
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    More about this item

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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