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Price Customization and Targeting in Matching Markets

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  • Gomes, Renato
  • Pavan, Alessandro

Abstract

We investigate the effects on targeting and welfare of uniform pricing (be it explicitly mandated, induced by privacy regulations, or the result of the transition from a centralized to a decentralized market structure). We build a model of many-to-many matching in which preferences are both vertically and horizontally differentiated. In the absence of uniform-price obligations, platforms maximize profits through price customization, using information on local elasticities. We show how uniform pricing may either increase or decrease targeting, and identify conditions under which it is beneficial to consumer surplus. The analysis has implications for online retailing, ad exchanges, and media markets

Suggested Citation

  • Gomes, Renato & Pavan, Alessandro, 2019. "Price Customization and Targeting in Matching Markets," CEPR Discussion Papers 12936, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:12936
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    References listed on IDEAS

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    1. Attila Ambrus & Emilio Calvano & Markus Reisinger, 2016. "Either or Both Competition: A "Two-Sided" Theory of Advertising with Overlapping Viewerships," American Economic Journal: Microeconomics, American Economic Association, vol. 8(3), pages 189-222, August.
    2. Johnson, T.R., 2013. "Matching through position auctions," Journal of Economic Theory, Elsevier, vol. 148(4), pages 1700-1713.
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    4. Gomes, Renato & Pavan, Alessandro, 2016. "Many-to-many matching and price discrimination," Theoretical Economics, Econometric Society, vol. 11(3), September.
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    7. Gregory S. Crawford, 2000. "The Impact of the 1992 Cable Act on Household Demand and Welfare," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 422-450, Autumn.
    8. Bruno Jullien & Alessandro Pavan, 2019. "Information Management and Pricing in Platform Markets," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 86(4), pages 1666-1703.
    9. Iñaki Aguirre & Simon Cowan & John Vickers, 2010. "Monopoly Price Discrimination and Demand Curvature," American Economic Review, American Economic Association, vol. 100(4), pages 1601-1615, September.
    10. Dirk Bergemann & Alessandro Bonatti, 2011. "Targeting in advertising markets: implications for offline versus online media," RAND Journal of Economics, RAND Corporation, vol. 42(3), pages 417-443, September.
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    Cited by:

    1. Alessandro Bonatti & Gonzalo Cisternas, 2020. "Consumer Scores and Price Discrimination," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 87(2), pages 750-791.

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    More about this item

    Keywords

    Many-to-many matching; Asymmetric information; Platforms; Incentives; Price discrimination;
    All these keywords.

    JEL classification:

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

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