Price Discrimination and Efficent Matching

ettore damiano, university of toronto
hao li, university of toronto

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 different markets, 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. We provide necessary and sufficient conditions for the revenue-maximizing market structure to be efficient. These conditions require complementarities in the match value function to be sufficiently strong along the efficient matching path.