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A Search-Matching Model of the Buyer--Seller Platforms

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  • Kong-Pin Chen
  • Yen-Chi Huang

Abstract

Based on the frictional matching framework, the article provides a theoretical model for a specific type of two-sided platform: the buyer--seller transaction platform. In the model, the number of participants and the source of network externalities are endogeneously determined. The platform is shown to exhibit both positive cross-group and negative within-group network externalities. The optimal pricing of the platform depends not only on the cost of providing service and the benefits of the participants, but also on how the marginal entrant (either a buyer or a seller) affects the matching probability. Since the sellers can shift the burden of entry fee to the buyers, the platform never subsidizes the sellers. (JEL codes: L11, D83) Copyright The Author 2012. Published by Oxford University Press on behalf of Ifo Institute, Munich. All rights reserved. For permissions, please email: journals.permissions@oup.com, Oxford University Press.

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Bibliographic Info

Article provided by CESifo in its journal CESifo Economic Studies.

Volume (Year): 58 (2012)
Issue (Month): 4 (December)
Pages: 626-649

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Handle: RePEc:oup:cesifo:v:58:y:2012:i:4:p:626-649

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  1. Andrei Hagiu, 2009. "Two-Sided Platforms: Product Variety and Pricing Structures," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(4), pages 1011-1043, December.
  2. repec:hrv:faseco:4589709 is not listed on IDEAS
  3. Marc Rysman, 2009. "The Economics of Two-Sided Markets," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 125-43, Summer.
  4. Rochet, Jean Charles & Tirole, Jean, 2007. "Tying-in Two-Sided Markets and the Honour All Cards Rule," CEPR Discussion Papers 6132, C.E.P.R. Discussion Papers.
  5. Glenn Allison & Drew Fudenberg, 2002. "Competing Auctions," Harvard Institute of Economic Research Working Papers 1960, Harvard - Institute of Economic Research.
  6. repec:rje:randje:v:37:y:2006:3:p:668-691 is not listed on IDEAS
  7. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
  8. Marc Rysman, 2004. "Competition Between Networks: A Study of the Market for Yellow Pages," Review of Economic Studies, Oxford University Press, vol. 71(2), pages 483-512.
  9. Glenn Ellison & Drew Fudenberg, 2003. "Knife-Edge Or Plateau: When Do Market Models Tip?," The Quarterly Journal of Economics, MIT Press, vol. 118(4), pages 1249-1278, November.
  10. Jean-Charles Rochet & Jean Triole, 2002. "Platform Competition in Two Sided Markets," FMG Discussion Papers dp409, Financial Markets Group.
  11. E. Glen Weyl, 2010. "A Price Theory of Multi-sided Platforms," American Economic Review, American Economic Association, vol. 100(4), pages 1642-72, September.
  12. Marc Rysman, 2004. "Competition Between Networks: A�Study of the Market for Yellow�Pages," Review of Economic Studies, Wiley Blackwell, vol. 71(2), pages 483-512, 04.
  13. repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
  14. Andrea Galeotti & José Luis Moraga Gonzales, 2008. "Platform Intermediation in a Market for Differentiated Products," CESifo Working Paper Series 2266, CESifo Group Munich.
  15. Attila Ambrus & Rossella Argenziano, 2009. "Asymmetric Networks in Two-Sided Markets," American Economic Journal: Microeconomics, American Economic Association, vol. 1(1), pages 17-52, February.
  16. Graeme Guthrie & Julian Wright, 2003. "Competing Payment Schemes," Departmental Working Papers wp0311, National University of Singapore, Department of Economics.
  17. Jullien, Bruno, 2008. "Price Skewness and Competition in Multi-Sided Markets," IDEI Working Papers 504, Institut d'Économie Industrielle (IDEI), Toulouse.
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