Search frictions, competing mechanisms and optimal market segmentation

Abstract

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Secret Search

“…Cai et al. () demonstrate that this decision depends crucially on the type of meeting mechanism assumed. Separate submarkets for each type of buyer (common with price posting models) are efficient if and only if meetings are bilateral.…”

“…However, using the Cai et al. () distinctions, but preserving the key margins that we focus on here, we can say that a model of this kind would most naturally be one with urn‐ball meetings. To the extent that the Cai et al.…”

“…To the extent that the Cai et al. () results carry over into this more general environment, they would imply the use of auctions with ex post screening. In our context, this would mean that firms would sell off high‐profile positions to candidates through a bidding process—something we do not typically see.…”

“…Some studies in the directed search literature have analyzed recruitment (Julien et al., ; Albrecht et al., ; Galenianos and Kircher, ; Wolthoff, ; and Basov et al., ), but in these studies firms do not decide which search process to use. The mechanism design literature (in particular, McAfee, ; Peters and Severinov, ; Eeckhout and Kircher, ; Guerrieri et al., ; Auster and Gottardi, ; and Cai et al., ) considers choices of pricing processes, but does not allow firms to choose the processes considered in this article.…”

Competing mechanisms in markets for lemons

“… See for example Eeckhout and Kircher (). For the private value case, Cai et al () in fact demonstrate that merging any two submarkets increases the total surplus under any type distribution if and only if the meeting technology satisfies a property called joint concavity . According to this property, the probability of meeting at least one low‐type seller is a concave function of the queue length of low‐type sellers and the queue length of high‐type sellers.…”