COWLES FOUNDATION FOR RESEARCH IN
ECONOMICS Box 208281
COWLES FOUNDATION DISCUSSION PAPER NO. 1752 Pricing in Matching Markets George J. Mailath, Andrew Postlewaite and Larry Samuelson January 2010 Different markets are cleared by different types of prices — a universal price for
all buyers and sellers in some markets, seller-specific prices that are uniform across
buyers in others, and personalized prices tailored to both the buyer and the seller in yet
others. We introduce the notion of premuneration values — the values in the absence
of any muneration (payments) — created by the buyer-seller match. We characterize the
premuneration values under which uniform-price and personalized-price equilibria agree. In
this case, we have efficient allocations, including pre-match investment decisions,
without the costs of personalized pricing. We then examine the inefficiencies that arise
when the premuneration values preclude the agreement of uniform-price and
personalized-price equilibria. We view premuneration values as an important consideration
in market design. |
