Price Discrimination in Many-to-Many Matching Markets

Renato Gomes and Alessandro Pavan

No 1540, Discussion Papers from Northwestern University, Center for Mathematical Studies in Economics and Management Science

Abstract: We study second-degree price discrimination in markets where the product traded by the monopolist is access to other agents. We derive necessary and sufficient conditions for the welfareand the profit-maximizing mechanisms to employ a single network or a menu of non-exclusive networks. We characterize the optimal matching schedules under a wide range of preferences, derive implications for prices, and deliver testable predictions relating the structure of the optimal pricing strategies to conditions on the distribution of match qualities. Our analysis sheds light on the distortions associated with the private provision of broadcasting, health insurance and job matching services. JEL Classification Numbers:D82

Keywords: matching; two-sided markets; networks; adverse selection; incentives; mechanism design (search for similar items in EconPapers)
Date: 2011-09
New Economics Papers: this item is included in nep-com, nep-cta, nep-gth and nep-ind
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