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A Price Theory of Multi-sided Platforms: Comment

Author

Listed:
  • Hongru Tan
  • Julian Wright

Abstract

Weyl (2010) shows that in multi-sided platform settings, profit maximization leads to classical and Spence distortions, with the Spence distortion providing a new explanation for why prices may sometimes be too high (or too low) on platforms. However, the key formulas Weyl gives comparing privately and socially optimal prices are misstated. Properly interpreted, his results only explain marginal incentives with respect to setting prices and not the total distortion in prices, which can be very different.

Suggested Citation

  • Hongru Tan & Julian Wright, 2018. "A Price Theory of Multi-sided Platforms: Comment," American Economic Review, American Economic Association, vol. 108(9), pages 2758-2760, September.
    • Handle: RePEc:aea:aecrev:v:108:y:2018:i:9:p:2758-60
    Note: DOI: 10.1257/aer.20172018
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    Citations

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    Cited by:

    1. Tan, Hongru & Wright, Julian, 2021. "Pricing distortions in multi-sided platforms," International Journal of Industrial Organization, Elsevier, vol. 79(C).
    2. Bruno Jullien & Alessandro Pavan & Marc Rysman, 2021. "Two-sided markets, pricing, and network effects," Post-Print hal-03828345, HAL.
    3. Mehmet Ekmekci & Alexander White & Lingxuan Wu, 2021. "Platform Competition and Interoperability: The Net Fee Model," Working Papers 21-13, NET Institute.

    More about this item

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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