An Analysis of Search and Authentication Strategies for Online Matching Platforms
forthcoming in Management Science
67 Pages Posted: 15 Dec 2015 Last revised: 11 Oct 2018
Date Written: January 28, 2018
Compared to offline matching markets, online matching platforms improve search in the matching process, but at the same time, increase the problem of authenticating the features and credentials of prospective matches. This paper examines the interplay between these two processes in online matching, using game-theoretic models. We examine whether an online matching platform should target a broad market of match-seekers or an exclusive group of high-value match-seekers, and how the platform should price its search and authentication services. Our results provide valuable insights for online matching platforms regarding the decision to offer authentication services in addition to search services, and guidelines for the pricing and positioning of these services. For instance, we show that the complementarity of the platform’s optimal pricing for search and authentication services can lead to the platform offering an authentication service as a loss leader, and that higher quality authentication services may not justify higher authentication fees. We also develop guidelines for the platform’s optimal strategies for different market conditions.
Keywords: matching, search, authentication, online markets, pricing, vertical differentiation
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