Alessandro Pavan (Northwestern University) "Price Customization and Targeting in Matching Markets"
| Dates: | 20 March 2019 |
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| Times: | 13:30 - 15:00 |
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| What is it: | Seminar |
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| Organiser: | School of Social Sciences |
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Abstract: Recent technologies enable matching intermediaries to engage in unprecedented levels of targeting, whereby matches finely depend on the agents' characteristics, but also favour customised (i.e., match specific) pricing. Yet, recent regulations prohibiting the transfer of personal data and imposing restrictions on bundling are expected to hinder price customisation and favour uniform pricing (whereby the price of a match charged to agents on a given side of a market is invariant to the agents' characteristics). To assess the impact of these developments, we build a model in which agents' preferences are both vertically and horizontally differentiated. We show how, absent uniform-price obligations, platforms maximise profits through price customisation and link the latter to structural elasticities. Perhaps surprisingly, we show that uniform-pricing obligations may either increase or decrease targeting, depending on testable properties of the demand. We then identify conditions under which uniform pricing is beneficial to consumer welfare. Finally, we show how the same analysis can shed light on whether the transition from a centralised to a decentralised structure (whereby one side posts prices and the other determines the composition of the matching sets) is welfare enhancing. The results have implications for online shopping, ad-exchanges, and media platforms.
http://faculty.wcas.northwestern.edu/~apa522/
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