Search and Authentication in Online Matching Markets
Compared to offline matching markets, online matchmaking firms improve search in the matchmaking process, but at the same time, increase the problem of authenticating the features and credentials of prospective matches. This paper examines the interplay between these two processes in online matchmaking, using game-theoretic models. We examine whether an online matchmaking firm should target a broad market of match seekers, or an exclusive group of high-value seekers, and how the firm can use a two-part pricing approach for search and authentication services. Our results provide valuable insights for online matchmaking firms regarding the trade-offs between search and authentication services, and providing guidelines for the pricing and positioning of their services. For instance, we show that the complementarity of the firm's optimal pricing for search and authentication services can lead to the firm offering an authentication service as a loss leader, and that higher quality authentication services may not justify higher authentication fees. We also develop guidelines for the firm's optimal strategies for different market conditions.
Business Administration, Management, and Operations
SMU Cox: IT & Operations Management (Topic)