IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v162y2019icp85-105.html
   My bibliography  Save this article

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167268119301167
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Moraga-González, José Luis & Wildenbeest, Matthijs R., 2008. "Maximum likelihood estimation of search costs," European Economic Review, Elsevier, vol. 52(5), pages 820-848, July.
    2. Phillip Leslie & Alan Sorensen, 2014. "Resale and Rent-Seeking: An Application to Ticket Markets," Review of Economic Studies, Oxford University Press, vol. 81(1), pages 266-300.
    3. Michael Dinerstein & Liran Einav & Jonathan Levin & Neel Sundaresan, 2018. "Consumer Price Search and Platform Design in Internet Commerce," American Economic Review, American Economic Association, vol. 108(7), pages 1820-1859, July.
    4. Ginger Zhe Jin & Marc Rysman, 2015. "Platform Pricing at Sports Card Conventions," Journal of Industrial Economics, Wiley Blackwell, vol. 63(4), pages 704-735, December.
    5. Katharina Sailer, 2006. "Searching the eBay Marketplace," CESifo Working Paper Series 1848, CESifo Group Munich.
    6. Jean-Charles Rochet & Jean Tirole, 2014. "Platform Competition in Two-Sided Markets," CPI Journal, Competition Policy International, vol. 10.
    7. Alessandro Gavazza & Alessandro Lizzeri & Nikita Roketskiy, 2014. "A Quantitative Analysis of the Used-Car Market," American Economic Review, American Economic Association, vol. 104(11), pages 3668-3700, November.
    8. Andrew Sweeting, 2012. "Dynamic Pricing Behavior in Perishable Goods Markets: Evidence from Secondary Markets for Major League Baseball Tickets," Journal of Political Economy, University of Chicago Press, vol. 120(6), pages 1133-1172.
    9. Glover, Brent & Raviv, Yaron, 2012. "Revenue non-equivalence between auctions with soft and hard closing mechanisms: New evidence from Yahoo!," Journal of Economic Behavior & Organization, Elsevier, vol. 81(1), pages 129-136.
    10. Susanna Esteban & Matthew Shum, 2007. "Durable-goods oligopoly with secondary markets: the case of automobiles," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 332-354, June.
    11. Thomas J. Holmes, 2011. "The Diffusion of Wal‐Mart and Economies of Density," Econometrica, Econometric Society, vol. 79(1), pages 253-302, January.
    12. Melnik, Mikhail I & Alm, James, 2002. "Does a Seller's Ecommerce Reputation Matter? Evidence from eBay Auctions," Journal of Industrial Economics, Wiley Blackwell, vol. 50(3), pages 337-349, September.
    13. Thomas Blake & Chris Nosko & Steven Tadelis, 2015. "Consumer Heterogeneity and Paid Search Effectiveness: A Large‐Scale Field Experiment," Econometrica, Econometric Society, vol. 83, pages 155-174, January.
    14. Bajari, Patrick & Hortacsu, Ali, 2003. " The Winner's Curse, Reserve Prices, and Endogenous Entry: Empirical Insights from eBay Auctions," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 329-355, Summer.
    15. Matthew Backus & Gregory Lewis, 2016. "Dynamic Demand Estimation in Auction Markets," NBER Working Papers 22375, National Bureau of Economic Research, Inc.
    16. Han Hong & Matthew Shum, 2006. "Using price distributions to estimate search costs," RAND Journal of Economics, RAND Corporation, vol. 37(2), pages 257-275, June.
    17. Lumeau, Marianne & Masclet, David & Penard, Thierry, 2015. "Reputation and social (dis)approval in feedback mechanisms: An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 112(C), pages 127-140.
    18. Alessandro Gavazza, 2011. "The Role of Trading Frictions in Real Asset Markets," American Economic Review, American Economic Association, vol. 101(4), pages 1106-1143, June.
    19. Jeitschko, Thomas D. & Tremblay, Mark J., 2014. "Homogeneous platform competition with endogenous homing," DICE Discussion Papers 166, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    20. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, vol. 91(3), pages 454-474, June.
    21. Tsuchihashi, Toshihiro, 2012. "Sequential Internet auctions with different ending rules," Journal of Economic Behavior & Organization, Elsevier, vol. 81(2), pages 583-598.
    22. Mark R. Jacobsen & Arthur A. van Benthem, 2015. "Vehicle Scrappage and Gasoline Policy," American Economic Review, American Economic Association, vol. 105(3), pages 1312-1338, March.
    23. Alan T. Sorensen, 2000. "Equilibrium Price Dispersion in Retail Markets for Prescription Drugs," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 833-862, August.
    24. Jiawei Chen & Susanna Esteban & Matthew Shum, 2013. "When Do Secondary Markets Harm Firms?," American Economic Review, American Economic Association, vol. 103(7), pages 2911-2934, December.
    25. Deltas, George & Jeitschko, Thomas D., 2007. "Auction hosting site pricing and market equilibrium with endogenous bidder and seller participation," International Journal of Industrial Organization, Elsevier, vol. 25(6), pages 1190-1212, December.
    26. Daniel Houser & John Wooders, 2006. "Reputation in Auctions: Theory, and Evidence from eBay," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(2), pages 353-369, June.
    27. Werner, Jan, 1987. "Arbitrage and the Existence of Competitive Equilibrium," Econometrica, Econometric Society, vol. 55(6), pages 1403-1418, November.
    28. Judith Chevalier & Austan Goolsbee, 2009. "Are Durable Goods Consumers Forward-Looking? Evidence from College Textbooks," The Quarterly Journal of Economics, Oxford University Press, vol. 124(4), pages 1853-1884.
    29. Kenneth E. Train, 1991. "Optimal Regulation: The Economic Theory of Natural Monopoly," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200848.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Online platform; Two-sided trade; Resalable good; Search cost; Resale cost; Trade friction;

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:162:y:2019:i:c:p:85-105. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/jebo .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.