Gender-based price discrimination in matching markets

Abstract

This paper develops a new model to analyze price discrimination in matching markets where agents have private information about their respective qualities. On the basis of signals (car, clothing, club membership, etc.) purchased from profit-maximizing firms, men and women form beliefs about each other's qualities. The matching must then be stable in the following sense: there cannot be a man and woman who are unmatched and who both believe they would be better off if they were matched with one another. The model enables an analysis of the impact of third-degree (or gender-based) price discrimination on welfare. When third-degree price discrimination is not feasible, the cost of eliciting private information is higher but a monopoly intermediary may have stronger incentives to implement an efficient allocation. I show that gender-based price discrimination is more likely to have a positive impact the more symmetric the matching environment is.