Working Paper: CEPR ID: DP12542
Authors: Xiaoming Cai; Pieter A. Gautier; Ronald Wolthoff
Abstract: We analyze a market in which sellers compete for heterogeneous buyers by postingmechanisms. A general meeting technology governs how buyers and sellers meet. Weintroduce a one-to-one transformation of this meeting technology that helps to clarifyand extend many of the existing results in the literature, which has focused on twospecial cases: urn-ball and bilateral meetings. We show that the optimal mechanismfor sellers is to post auctions combined with a reserve price equal to their own valuationand an appropriate fee (or subsidy) which is paid by (or to) all buyers meeting theseller. Even when there are externalities in the meeting process, the equilibrium is efficient.Finally, we analyze the sorting patterns between heterogeneous buyers and sellersand show under which conditions high-value sellers attract more high-value buyers inexpectation.
Keywords: Search Frictions; Matching Function; Meeting Technology; Competing Mechanisms; Heterogeneity
JEL Codes: C78; D44; D83
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Sellers posting auctions with reserve prices and appropriate fees (D44) | Efficient equilibria (D51) |
| Meeting technology (L96) | Sorting patterns between buyers and sellers (C78) |
| High-value sellers (D46) | High-value buyers (D16) |