Search Frictions, Competing Mechanisms and Optimal Market Segmentation

Meetings and Mechanisms

“…For example, we establish that the finding of Albrecht et al (2012) that reserve prices are driven to sellers' valuation in an environment with competing auctions and ex ante heterogeneous buyers only holds for some meeting technologies but not for others, which complements a similar finding by Lester et al (2015) in an environment with ex post buyer heterogeneity. In addition, we show that some meeting technologies give rise to partial separation instead of complete pooling or complete separation, which have been the focus of the literature so far (see Eeckhout and Kircher, 2010b;Cai et al, 2017).…”

“…From Cai et al. (2017), we know that jointly concave technologies imply complete pooling, whereas bilateral technologies imply complete separation. The third possibility, which spans the range between these extremes, is new.…”

“…25 Lester et al (2015) first introduced invariant meeting technologies in terms of P n (λ). Cai et al (2017) show that their definition is equivalent to φ λ (μ, λ) = 0.…”

“…This exercise could be interpreted as an increase in the dispersion of buyers' valuations. Cai et al (2017) apply the tools that are developed in this article (which we discuss in more detail below) to derive conditions on the meeting technology for which the equilibrium features either perfect separation or perfect pooling of different types of buyers. They find that perfect separation occurs if and only if meetings are bilateral, whereas perfect pooling arises if and only if the meeting technology is jointly concave.…”

“…Cai et al (2017) exploit this feature in their work.10 Although we assume a fixed number of sellers to simplify exposition, our results carry over to an environment with free entry of sellers, as inAlbrecht et al (2014), in a straightforward manner.11 The reserve price or fee can vary across sellers in equilibrium. This is a key difference withLester et al (2015), where the fee is the same for all sellers as it only depends on exogenous parameters.12 In line with most of the literature, we abstract from mechanisms that condition on other mechanisms present in the market.…”