Pricing in Matching Markets

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.

Keywords: Directed Search, Matching, Premuneration Value, Prematch Investments, Search

JEL Classification: C78, D40, D41, D50, D83

Suggested Citation: Suggested Citation

Mailath, George J. and Postlewaite, Andrew and Samuelson, Larry, Pricing in Matching Markets (January 27, 2010). Cowles Foundation Discussion Paper No. 1752, Available at SSRN: https://ssrn.com/abstract=1543308 or http://dx.doi.org/10.2139/ssrn.1543308

George J. Mailath

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States
215-898-7908 (Phone)
215-573-2057 (Fax)

HOME PAGE: http://web.sas.upenn.edu/gmailath/

Research School of Economics, ANU ( email )

HW Arndt Building
College of Business and Economics
Canberra, ACT 2601
Australia

Andrew Postlewaite

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States
215-898-7350 (Phone)
215-573-2057 (Fax)

HOME PAGE: http://www.econ.upenn.edu/~apostlew