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Search Frictions, Competing Mechanisms and Optimal Market Segmentation

Xiaoming Cai, Pieter Gautier () and Ronald Wolthoff ()
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Xiaoming Cai: Tongji University, PR China

No 16-036/VI, Tinbergen Institute Discussion Papers from Tinbergen Institute

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; competing mechanisms; heterogeneity (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 and nep-ore
Date: 2016-05-17
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https://papers.tinbergen.nl/16036.pdf (application/pdf)

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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