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Search and resale frictions in a two-sided online platform: A case of multi-use assets

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  • Yoshimoto, Hisayuki
  • Nakabayashi, Jun

Abstract

How large are two-sided transaction costs in online platform trades, and who are the major beneficiaries of friction cost reductions? Using a dataset of a multi-use train ticket resale market, we analyze the welfare structure with buyer-seller matching frictions on an online platform. Our model shows that competitive online resale market prices work as a conductor of transaction cost externalities, clarifying what types of buyers bear what friction costs. The estimation results show that individual-level welfare losses, which could be considered an online resale market dead-weight loss, are non-negligibly large and heterogeneous across buyers, ranging from 3% to 21% of the new good price. Welfare losses are particularly disadvantageous to users who demand small degrees of usage, as they are more likely to be excluded from trading opportunities. Our model also suggests that, when competitive resale markets experience friction cost reductions, welfare gains are larger among small degree users of resalable goods, providing an explanation for the recent expansion of high-turnover online trades.

Suggested Citation

  • Yoshimoto, Hisayuki & Nakabayashi, Jun, 2019. "Search and resale frictions in a two-sided online platform: A case of multi-use assets," Journal of Economic Behavior & Organization, Elsevier, vol. 162(C), pages 85-105.
    • Handle: RePEc:eee:jeborg:v:162:y:2019:i:c:p:85-105
    DOI: 10.1016/j.jebo.2019.04.013
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    More about this item

    Keywords

    Online platform; Two-sided trade; Resalable good; Search cost; Resale cost; Trade friction;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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