Document Type
Discussion Paper
Publication Date
7-1-2011
CFDP Number
1810
CFDP Pages
68
Abstract
Different markets are cleared by different types of prices — seller-specific prices that are uniform across buyers in some markets, and personalized prices tailored to the buyer in others. We examine a setting in which buyers and sellers make investments before matching in a competitive market. We introduce the notion of premuneration values — the values to the transacting agents prior to any transfers — created by a buyer-seller match. Personalized price equilibrium outcomes are independent of premuneration values and exhibit inefficiencies only in the event of “coordination failures,” while uniform-price equilibria depend on premuneration values and in general feature inefficient investments even without coordination failures. There is thus a trade-off between the costs of personalizing prices and the inefficient investments under uniform prices. We characterize the premuneration values under which uniform-price equilibria similarly exhibit inefficiencies only in the event of coordination failures.
Recommended Citation
Mailath, George J.; Postlewaite, Andrew; and Samuelson, Larry, "Pricing and Investments in Matching Markets" (2011). Cowles Foundation Discussion Papers. 2156.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/2156