Spatial competition with intermediated matching

Abstract

This paper analyzes the spatial competition in commission fees between two match makers. These match makers serve as middlemen between buyers and sellers who are located uniformly on a circle. The profits of the match makers are determined by their respective market sizes. A limited willingness to pay is incorporated by means of reservation prices. If the fraction of buyers and sellers is unequal, the match makers are willing to subsidize the short side of the market, while the long side is exploited completely, provided reservation prices are sufficiently high. Competition is then concentrated entirely on the short side. When reservation prices are low, two local monopolies will emerge.Matching;Price Competition;Intermediation;Microeconometrics;microeconomics