Meetings and Mechanisms
By Pieter Gautier, Xiaoming Cai and Ronald Wolthoff
Abstract:
There exists a lot of variation in terms of how buyers and sellers meet, both across sectors and over time as new technologies arrive. Rationed sellers care about how many buyers visit because this affects the expected highest valuation. In this paper we construct a new method to characterize the meeting technology and then ask, in the context of a directed-search model with competing mechanisms, how it affects market segmentation and the equilibrium selling mechanisms. Under mild conditions, high-valuation buyers are all located in the same segment. Then, we show under what conditions, low valuation buyers are in: (i) the same segment, (ii) a different segment and (iii) a mixture of (i) and (ii). The decentralized equilibrium is always efficient when sellers can post auctions with reserve prices or entry fees.
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