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Pricing in Matching MarketsGeorge J. MailathUniversity of Pennsylvania - Department of Economics Andrew PostlewaiteUniversity of Pennsylvania - Department of Economics Larry SamuelsonYale University January 27, 2010 Cowles Foundation Discussion Paper No. 1752 Abstract: Different markets are cleared by different types of prices - a universal price for all buyers and sellers in some markets, seller-specific prices that are uniform across buyers in others, and personalized prices tailored to both the buyer and the seller in yet others. We introduce the notion of premuneration values - the values in the absence of any muneration (payments) - created by the buyer-seller match. We characterize the premuneration values under which uniform-price and personalized-price equilibria agree. In this case, we have efficient allocations, including pre-match investment decisions, without the costs of personalized pricing. We then examine the inefficiencies that arise when the premuneration values preclude the agreement of uniform-price and personalized-price equilibria. We view premuneration values as an important consideration in market design.
Number of Pages in PDF File: 66 Keywords: Directed Search, Matching, Premuneration Value, Prematch Investments, Search JEL Classification: C78, D40, D41, D50, D83 working papers seriesDate posted: January 28, 2010Suggested CitationContact Information
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