Pricing and investments in matching markets

George Mailath, Andrew Postlewaite and Larry Samuelson ()
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Larry Samuelson: Department of Economics, Yale University

Theoretical Economics, 2013, vol. 8, issue 2

Abstract: Different markets are cleared by different types of prices---seller-specific prices that are uniform across buyers in some markets, and personalized prices tailored to the buyer in others. We examine a setting in which buyers and sellers make investments before matching in a competitive market. We introduce the notion of premuneration values---the values to the transacting agents prior to any transfers---created by a buyer-seller match. Personalized price equilibrium outcomes are independent of premuneration values and exhibit inefficiencies only in the event of "coordination failures," while uniform-price equilibria depend on premuneration values and in general feature inefficient investments even without coordination failures. There is thus a trade-off between the costs of personalizing prices and the inefficient investments under uniform prices. We characterize the premuneration values under which uniform-price equilibria similarly exhibit inefficiencies only in the event of coordination failures.

Keywords: Directed search; matching; premuneration value; prematch investments; search (search for similar items in EconPapers)
JEL-codes: C78 D40 D41 D50 D83 (search for similar items in EconPapers)
Date: 2013-05-17
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

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Related works:
Working Paper: Pricing and Investments in Matching Markets (2011)
Working Paper: Pricing and Investments in Matching Markets (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:the:publsh:1189

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