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Many-to-Many Matching Design and Price Discrimination

Author

Listed:
  • Alessandro Pavan

    (Northwestern University)

  • Renato Gomes

    (Toulouse School of Economics)

Abstract

This paper studies second-degree price discrimination in matching markets, that is, in markets where the product sold by the monopolist is access to other agents. In order to investigate the optimality of a large variety of pricing strategies, we allow for any many-to-many matching rule that satisfies a weak reciprocity condition. In this context, we derive necessary and sufficient conditions for the welfare and profit-maximizing mechanisms to employ a single network or to offer a menu of non-exclusive networks (multi-homing). We characterize the matching schedules that arise under a wide range of preferences, and deliver testable comparative statics results that relate the pricing strategies of a profit-maximizing platform to conditions on demand and the distribution of match qualities. Our analysis sheds light on the distortions brought by the private provision of broadcasting, health insurance and job matching services.

Suggested Citation

  • Alessandro Pavan & Renato Gomes, 2011. "Many-to-Many Matching Design and Price Discrimination," 2011 Meeting Papers 1212, Society for Economic Dynamics.
  • Handle: RePEc:red:sed011:1212
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    References listed on IDEAS

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