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Market Size in Pricing Problems on Multi-sided Matching Platforms

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  • Jorge Arenas M.

Abstract

In this paper, I analyze pricing problems of a monopolistic platform that offers matching services to agents with heterogeneous preferences in multi-sided markets. First, I extend the Marx and Schummer (2021) model to multi-sided markets and show that its main result holds: the allocation of the price level across the sides of the market is not affected by the size imbalance across these sides. I then use preference simulations to address the price level problem in two-sided markets. I find that the optimal price level depends positively on: (i) the size of the market when it is balanced; and (ii) the imbalance of the market when it is unbalanced. The simulations also yield important implications for the relationship between the percentage of unmatched agents and market size and imbalance.

Suggested Citation

  • Jorge Arenas M., 2024. "Market Size in Pricing Problems on Multi-sided Matching Platforms," Working Papers Central Bank of Chile 1033, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:1033
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    References listed on IDEAS

    as
    1. Itai Ashlagi & Yash Kanoria & Jacob D. Leshno, 2017. "Unbalanced Random Matching Markets: The Stark Effect of Competition," Journal of Political Economy, University of Chicago Press, vol. 125(1), pages 69-98.
    2. Mark Armstrong, 2006. "Competition in two‐sided markets," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 668-691, September.
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    6. Johnson, T.R., 2013. "Matching through position auctions," Journal of Economic Theory, Elsevier, vol. 148(4), pages 1700-1713.
    7. Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, June.
    8. Jorge Arenas & Juan Pablo Torres-Martínez, 2023. "Reconsidering the existence of stable solutions in three-sided matching problems with mixed preferences," Journal of Combinatorial Optimization, Springer, vol. 45(2), pages 1-8, March.
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