Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/the/publsh/1904.html
   My bibliography  Save this article

Many-to-many matching and price discrimination

Author

Listed:
  • Gomes, Renato

    (Toulouse School of Economics (CNRS-GREMAQ))

  • Pavan, Alessandro

    (Department of Economics, Northwestern University)

Abstract
We study centralized many-to-many matching in markets where agents have private information about (vertical) characteristics that determine match values. Our analysis reveals how matching patterns reflect cross-subsidization between sides. Agents are endogenously partitioned into consumers and inputs. At the optimum, the costs of procuring agents-inputs are compensated by the gains from agents-consumers. We show how such cross-subsidization can be achieved through matching rules that have a simple threshold structure, and deliver testable predictions relating the optimal price schedules to the distribution of the agents' characteristics. The analysis sheds light on the practice of large matching intermediaries, such as media and business-to-business platforms, advertising exchanges, and commercial lobbying firms.

Suggested Citation

  • Gomes, Renato & Pavan, Alessandro, 2016. "Many-to-many matching and price discrimination," Theoretical Economics, Econometric Society, vol. 11(3), September.
    • Handle: RePEc:the:publsh:1904
    as

    Download full text from publisher

    File URL: http://econtheory.org/ojs/index.php/te/article/viewFile/20161005/16181/483
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. ,, 2009. "Monopolistic group design with peer effects," Theoretical Economics, Econometric Society, vol. 4(1), March.
    2. Strausz, Roland, 2006. "Deterministic versus stochastic mechanisms in principal-agent models," Journal of Economic Theory, Elsevier, vol. 128(1), pages 306-314, May.
    3. Johnson, T.R., 2013. "Matching through position auctions," Journal of Economic Theory, Elsevier, vol. 148(4), pages 1700-1713.
    4. Patrick Legros & Andrew F. Newman, 2007. "Beauty Is a Beast, Frog Is a Prince: Assortative Matching with Nontransferabilities," Econometrica, Econometric Society, vol. 75(4), pages 1073-1102, July.
    5. Glenn Ellison & Drew Fudenberg, 2003. "Knife-Edge or Plateau: When Do Market Models Tip?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(4), pages 1249-1278.
    6. Caillaud, Bernard & Jullien, Bruno, 2003. "Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-328, Summer.
    7. Arnott, Richard & Rowse, John, 1987. "Peer group effects and educational attainment," Journal of Public Economics, Elsevier, vol. 32(3), pages 287-305, April.
    8. Marc Rysman, 2009. "The Economics of Two-Sided Markets," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 125-143, Summer.
    9. Patrick Legros & Andrew Newman, 2007. "Beauty is a beast, frog is a prince :assortative matching in a nontransferable world," ULB Institutional Repository 2013/7022, ULB -- Universite Libre de Bruxelles.
    10. repec:hrv:faseco:4589709 is not listed on IDEAS
    11. Ettore Damiano & Li Hao, 2008. "Competing Matchmaking," Journal of the European Economic Association, MIT Press, vol. 6(4), pages 789-818, June.
    12. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    13. David Lucking-Reiley & Daniel F. Spulber, 2001. "Business-to-Business Electronic Commerce," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 55-68, Winter.
    14. ?zlem Bedre-Defolie & Emilio Calvano, 2013. "Pricing Payment Cards," American Economic Journal: Microeconomics, American Economic Association, vol. 5(3), pages 206-231, August.
    15. Caillaud, Bernard & Jullien, Bruno, 2001. "Competing cybermediaries," European Economic Review, Elsevier, vol. 45(4-6), pages 797-808, May.
    16. Jan Eeckhout & Philipp Kircher, 2010. "Sorting and Decentralized Price Competition," Econometrica, Econometric Society, vol. 78(2), pages 539-574, March.
    17. Bruno Jullien & Alessandro Pavan, 2019. "Information Management and Pricing in Platform Markets," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 86(4), pages 1666-1703.
    18. Robert Shimer & Lones Smith, 2000. "Assortative Matching and Search," Econometrica, Econometric Society, vol. 68(2), pages 343-370, March.
    19. Robin S. Lee, 2013. "Vertical Integration and Exclusivity in Platform and Two-Sided Markets," American Economic Review, American Economic Association, vol. 103(7), pages 2960-3000, December.
    20. Heidrun C. Hoppe & Benny Moldovanu & Aner Sela, 2009. "The Theory of Assortative Matching Based on Costly Signals," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 76(1), pages 253-281.
    21. Attila Ambrus & Rossella Argenziano, 2009. "Asymmetric Networks in Two-Sided Markets," American Economic Journal: Microeconomics, American Economic Association, vol. 1(1), pages 17-52, February.
    22. Alexander White & E. Glen Weyl, 2010. "Imperfect Platform Competition: A General Framework," Working Papers 10-17, NET Institute, revised Nov 2010.
    23. Patrick Legros & Andrew F. Newman, 2002. "Monotone Matching in Perfect and Imperfect Worlds," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(4), pages 925-942.
    24. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
    25. Heidrun Hoppe & Benny Moldovanu & Emre Ozdenoren, 2011. "Coarse matching with incomplete information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 47(1), pages 75-104, May.
    26. Terence Johnson, 2009. "Matching Through Position Auctions," Working Papers 001, University of Notre Dame, Department of Economics, revised Jan 2011.
    27. Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, vol. 88(1), pages 33-62, March.
    28. Kaiser, Ulrich & Wright, Julian, 2006. "Price structure in two-sided markets: Evidence from the magazine industry," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 1-28, January.
    29. Robin S. Lee, 2014. "Competing Platforms," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(3), pages 507-526, September.
    30. Jullien, Bruno & Pavan, Alessandro, 2013. "Platform Pricing under Dispersed Information," IDEI Working Papers 793, Institut d'Économie Industrielle (IDEI), Toulouse.
    31. William C. Strange & Robert W. Helsley, 2000. "Social Interactions and the Institutions of Local Government," American Economic Review, American Economic Association, vol. 90(5), pages 1477-1490, December.
    32. Claudio Mezzetti, 2007. "Mechanism Design with Interdependent Valuations: Surplus Extraction," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 31(3), pages 473-488, June.
    33. R. Preston McAfee, 2002. "Coarse Matching," Econometrica, Econometric Society, vol. 70(5), pages 2025-2034, September.
    34. Edward P. Lazear, 2001. "Educational Production," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(3), pages 777-803.
    35. Becker, Gary S, 1973. "A Theory of Marriage: Part I," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 813-846, July-Aug..
    36. Ettore Damiano & Hao Li, 2007. "Price discrimination and efficient matching," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 30(2), pages 243-263, February.
    37. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
    38. Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
    39. Evans David S. & Schmalensee Richard, 2010. "Failure to Launch: Critical Mass in Platform Businesses," Review of Network Economics, De Gruyter, vol. 9(4), pages 1-28, December.
    40. Kaiser, Ulrich & Song, Minjae, 2009. "Do media consumers really dislike advertising? An empirical assessment of the role of advertising in print media markets," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 292-301, March.
    41. Cremer, Jacques & McLean, Richard P, 1988. "Full Extraction of the Surplus in Bayesian and Dominant Strategy Auctions," Econometrica, Econometric Society, vol. 56(6), pages 1247-1257, November.
    42. Wilson, Robert, 1997. "Nonlinear Pricing," OUP Catalogue, Oxford University Press, number 9780195115826.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Renato Gomes & Alessandro Pavan, 2013. "Cross-Subsidization and Matching Design," Discussion Papers 1559, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. Pavan, Alessandro & Jullien, Bruno & Rysman, Marc, 2021. "Two-sided Markets, Pricing, and Network Effects," CEPR Discussion Papers 16480, C.E.P.R. Discussion Papers.
    3. Renato Gomes & Alessandro Pavan, 2011. "Price Discrimination in Many-to-Many Matching Markets," Discussion Papers 1540, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    4. Alessandro Pavan & Renato Gomes, 2011. "Many-to-Many Matching Design and Price Discrimination," 2011 Meeting Papers 1212, Society for Economic Dynamics.
    5. Aoyagi, Masaki & Yoo, Seung Han, 2022. "Matching strategic agents on a two-sided platform," Games and Economic Behavior, Elsevier, vol. 135(C), pages 271-296.
    6. Ashwin Kambhampati & Carlos Segura-Rodriguez, 2020. "The Optimal Assortativity of Teams Inside the Firm," PIER Working Paper Archive 20-018, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    7. Veiga, André, 2018. "A note on how to sell a network good," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 114-126.
    8. Heidrun Hoppe & Benny Moldovanu & Emre Ozdenoren, 2011. "Coarse matching with incomplete information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 47(1), pages 75-104, May.
    9. Daniel Fershtman & Alessandro Pavan, 2022. "Matching auctions," RAND Journal of Economics, RAND Corporation, vol. 53(1), pages 32-62, March.
    10. John Duffy & Seung Han Yoo, 2022. "On the Origin of Polarization," Discussion Paper Series 2202, Institute of Economic Research, Korea University.
    11. ,, 2009. "Monopolistic group design with peer effects," Theoretical Economics, Econometric Society, vol. 4(1), March.
    12. De Fraja, Gianni & Sákovics, József, 2012. "Exclusive nightclubs and lonely hearts columns: Non-monotone participation in optional intermediation," Journal of Economic Behavior & Organization, Elsevier, vol. 84(2), pages 618-632.
    13. Chris Bidner, 2014. "A spillover-based theory of credentialism," Canadian Journal of Economics, Canadian Economics Association, vol. 47(4), pages 1387-1425, November.
    14. Condorelli, Daniele, 2012. "What money canʼt buy: Efficient mechanism design with costly signals," Games and Economic Behavior, Elsevier, vol. 75(2), pages 613-624.
    15. Terence Johnson, 2009. "Matching Through Position Auctions," Working Papers 001, University of Notre Dame, Department of Economics, revised Jan 2011.
    16. Attila Ambrus & Rossella Argenziano, 2009. "Asymmetric Networks in Two-Sided Markets," American Economic Journal: Microeconomics, American Economic Association, vol. 1(1), pages 17-52, February.
    17. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899.
    18. Reisinger, Markus, 2014. "Two-part tariff competition between two-sided platforms," European Economic Review, Elsevier, vol. 68(C), pages 168-180.
    19. Hanna Halaburda & Mikołaj Jan Piskorski & Pınar Yıldırım, 2018. "Competing by Restricting Choice: The Case of Matching Platforms," Management Science, INFORMS, vol. 64(8), pages 3574-3594, August.
    20. Terence R. Johnson, 2019. "Synchronized matching with incomplete information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 67(3), pages 589-616, April.

    More about this item

    Keywords

    Vertical matching markets; many-to-many matching; asymmetric information; mechanism design; cross-subsidization;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:the:publsh:1904. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Martin J. Osborne (email available below). General contact details of provider: http://econtheory.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.