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Search Frictions, Competing Mechanisms and Optimal Market Segmentation

Xiaoming Cai (), Pieter Gautier () and Ronald Wolthoff ()
Additional contact information
Xiaoming Cai: Tongji University

No 9950, IZA Discussion Papers from Institute of Labor Economics (IZA)

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 a separate submarket for each type of buyer is the efficient outcome if and only if meetings are bilateral. In contrast, a single market with all agents 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.

Keywords: search frictions; matching function; meeting technology; heterogeneity; competing mechanisms (search for similar items in EconPapers)
JEL-codes: C78 D44 D83 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gth, nep-ind, nep-lab, nep-mic and nep-ore
Date: 2016-05
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Published in: Journal of Economic Theory, 2017, 169, 453-473

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Related works:
Journal Article: Search frictions, competing mechanisms and optimal market segmentation (2017) Downloads
Working Paper: Search Frictions, Competing Mechanisms and Optimal Market Segmentation (2016) Downloads
Working Paper: Search Frictions, Competing Mechanisms and Optimal Market Segmentation (2016) Downloads
Working Paper: Search Frictions, Competing Mechanisms and Optimal Market Segmentation (2016) Downloads
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