Pricing and Investments in Matching Markets

George Mailath, Andrew Postlewaite and Larry Samuelson ()
Additional contact information
Larry Samuelson: Cowles Foundation, Yale University, https://economics.yale.edu/people/faculty/larry-samuelson

No 1810, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

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)
Pages: 68 pages
Date: 2011-07
New Economics Papers: this item is included in nep-gth and nep-mic
Note: CFP 1408
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in Theoretical Economics (May 2013), 8(2): 535-590

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Related works:
Journal Article: Pricing and investments in matching markets (2013)
Working Paper: Pricing and Investments in Matching Markets (2011)
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