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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.

Suggested Citation

  • Kong-Pin Chen & Yen-Chi Huang, 2012. "A Search-Matching Model of the Buyer--Seller Platforms," CESifo Economic Studies, CESifo, vol. 58(4), pages 626-649, December.
  • Handle: RePEc:oup:cesifo:v:58:y:2012:i:4:p:626-649
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    References listed on IDEAS

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    1. E. Glen Weyl, 2010. "A Price Theory of Multi-sided Platforms," American Economic Review, American Economic Association, vol. 100(4), pages 1642-1672, September.
    2. Graeme Guthrie & Julian Wright, 2003. "Competing Payment Schemes," Departmental Working Papers wp0311, National University of Singapore, Department of Economics.
    3. 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.
    4. Glenn Ellison & Drew Fudenberg, 2003. "Knife-Edge or Plateau: When Do Market Models Tip?," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1249-1278.
    5. Rochet, Jean Charles & Tirole, Jean, 2008. "Tying in two-sided markets and the honor all cards rule," International Journal of Industrial Organization, Elsevier, pages 1333-1347.
    6. Jean‐Charles Rochet & Jean Tirole, 2006. "Two‐sided markets: a progress report," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 645-667, September.
    7. Jean-Charles Rochet & Jean Tirole, 2014. "Platform Competition in Two-Sided Markets," CPI Journal, Competition Policy International, vol. 10.
    8. 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.
    9. 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.
    10. Marc Rysman, 2009. "The Economics of Two-Sided Markets," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 125-143, Summer.
    11. Glenn Ellison & Drew Fudenberg & Markus Möbius, 2004. "Competing Auctions," Journal of the European Economic Association, MIT Press, vol. 2(1), pages 30-66, March.
    12. Jullien, Bruno, 2008. "Price Skewness and Competition in Multi-Sided Markets," IDEI Working Papers 504, Institut d'Économie Industrielle (IDEI), Toulouse.
    13. repec:hrv:faseco:4589709 is not listed on IDEAS
    14. 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.
    15. repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
    16. repec:rje:randje:v:37:y:2006:3:p:668-691 is not listed on IDEAS
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    More about this item

    JEL classification:

    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact

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