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Price discrimination and efficient matching

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  • Ettore Damiano
  • Hao Li

Abstract

This paper considers the problem of a monopoly matchmaker that uses a schedule of entrance fees to sort different types of agents on the two sides of a matching market into exclusive meeting places, where agents randomly form pairwise matches. We make the standard assumption that the match value function exhibits complementarities, so that matching types at equal percentiles maximizes total match value and is efficient. We provide necessary and sufficient conditions for the revenue-maximizing sorting to be efficient. These conditions require the match value function, modified to incorporate the incentive cost of eliciting private type information, to exhibit complementarities along the efficient path of matching types at equal percentiles.
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Suggested Citation

  • 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.
    • Handle: RePEc:spr:joecth:v:30:y:2007:i:2:p:243-263
    DOI: 10.1007/s00199-005-0058-2
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