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Authors:

• Ettore DAMIANO
  University of Toronto

• Hao LI
  University of Toronto

We study how competing matchmakers use prices to sort participants into search markets, where they form random pairwise matches, and how equilibrium outcomes compare with monopoly in terms of prices, search market structure and sorting efficiency. The role of prices to facilitate sorting is compromised by the need to survive price competition. We show that the competitive outcome can be less efficient in sorting than the monopoly outcome in terms of total match value. In particular, price competition results in a high quality market that is insufficiently exclusive.