Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2016-05-17
Number: 16-036/VI
Author-Name: Xiaoming Cai
Author-Workplace-Name: Tongji University, PR China
Author-Name: Pieter Gautier
Author-Workplace-Name: VU University Amsterdam, the Netherlands
Author-Name: Ronald Wolthoff
Author-Workplace-Name: University of Toronto, Canada
Title: Search Frictions, Competing Mechanisms and Optimal Market Segmentation
Abstract: In a market in which sellers compete for heterogeneous buyers by posting mechanisms, we analyze how the properties of the meeting technology affect the allocation of buyers to sellers. We show that a separate submarket for each type of buyer is the efficient outcome if and only if meetings are bilateral. In contrast, a single market with all agents is optimal if and only if the meeting technology satisfies a novel condition, which we call "joint concavity." Both outcomes can be decentralized by sellers posting auctions combined with a fee that is paid by (or to) all buyers with whom the seller meets. Finally, we compare joint concavity to two other properties of meeting technologies, invariance and non-rivalry, and explain the differences.
Classification-JEL: C78, D44, D83
Keywords: search frictions, matching function, meeting technology, competing mechanisms, heterogeneity
File-Url: https://papers.tinbergen.nl/16036.pdf
File-Format: application/pdf
File-Size: 934841 bytes
Handle: RePEc:tin:wpaper:20160036