Coarse Matching and Price Discrimination

33 Pages Posted: 27 Jun 2007

See all articles by Heidrun C. Hoppe-Wewetzer

Heidrun C. Hoppe-Wewetzer

University of Hannover - Department of Economics; and CEPR

Benny Moldovanu

University of Bonn - Chair of Economic Theory II; Centre for Economic Policy Research (CEPR)

Emre Ozdenoren

London Business School; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2007

Abstract

We study two-sided markets with heterogeneous, privately informed agents who gain from being matched with better partners from the other side. Agents are matched through an intermediary. Our main results quantify the relative attractiveness of a coarse matching scheme consisting of two classes of agents on each side, in terms of matching surplus (output), the intermediary's revenue, and the agents' welfare (defined by the total surplus minus payments to the intermediary). In a nutshell, our philosophy is that, if the worst-case scenario under coarse matching is not too bad relative to what is achievable by more complex, finer schemes, a coarse matching scheme will turn out to be preferable once the various transaction costs associated with fine schemes are taken into account. Similarly, coarse matching schemes can be significantly better than completely random matching, requiring only a minimal amount of information.

Keywords: Matching, Nonlinear Pricing

JEL Classification: C78, D42, D82, L15

Suggested Citation

Hoppe-Wewetzer, Heidrun C. and Moldovanu, Benny and Ozdenoren, Emre, Coarse Matching and Price Discrimination (January 2007). CEPR Discussion Paper No. 6041, Available at SSRN: https://ssrn.com/abstract=996923

Heidrun C. Hoppe-Wewetzer (Contact Author)

University of Hannover - Department of Economics; and CEPR ( email )

Koenigsworther Platz 1
30167 Hannover
Germany

HOME PAGE: http://www.mik.uni-hannover.de

Benny Moldovanu

University of Bonn - Chair of Economic Theory II ( email )

Lennestrasse 37
53113 Bonn
Germany
+49 228 736395 (Phone)
+49 228 737940 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Emre Ozdenoren

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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