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Many-to-Many Matching Design and Price Discrimination

  • Alessandro Pavan

    (Northwestern University)

  • Renato Gomes

    (Toulouse School of Economics)

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.

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Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 1212.

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Date of creation: 2011
Date of revision:
Handle: RePEc:red:sed011:1212
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

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