Inclusive versus Exclusive Markets

Ronald Wolthoff, Pieter Gautier and Xiaoming Cai
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Xiaoming Cai: VU University Amsterdam

No 262, 2016 Meeting Papers from Society for Economic Dynamics

Abstract: In a market in which sellers compete for heterogeneous buyers by posting mechanisms, we analyze how the properties of the meeting technology affect the allocation of buyers to sellers. We show that exclusive markets (i.e. a separate submarket for each type of buyer) are the efficient outcome if and only if meetings are bilateral. In contrast, an inclusive market (i.e. a single market in which all buyer types pool) is optimal if and only if the meeting technology satisfies a novel condition, which we call joint concavity." Both outcomes can be decentralized by sellers posting auctions combined with a fee that is paid by (or to) all buyers with whom the seller meets. Finally, we compare joint concavity to two other properties of meeting technologies, invariance and non-rivalry, and explain the differences.

Date: 2016
New Economics Papers: this item is included in nep-mic
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