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Platform Pricing Structure and Moral Hazard

Listed author(s):
  • Roger, G
  • Vasconcelos, LI

We study pricing by a two-sided platform when it faces moral hazard on the sellers? side. In doing so, we introduce an equilibrium notion of platform reputation in an infinite horizon model. We find that with transaction fees only, the platform cannot eliminate the loss of reputation induced by moral hazard. If registration fees can be levied, moral hazard can be overcome. The registration fee determines the participation threshold of sellers and extracts them, while (lower) transaction fees provide incentives for good behavior. This provides a motivation for platforms to use registration fees in addition to transaction fees.

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File URL: http://repository.essex.ac.uk/10006/
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Paper provided by University of Essex, Department of Economics in its series Economics Discussion Papers with number 10006.

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Date of creation: 2013
Handle: RePEc:esx:essedp:10006
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Order Information: Postal: Discussion Papers Administrator, Department of Economics, University of Essex, Wivenhoe Park, Colchester CO4 3SQ, U.K.
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References listed on IDEAS
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  1. 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.
  2. Hanna Halaburda & Mikolaj Jan Piskorski, 2010. "Competing by Restricting Choice: The Case of Search Platforms," Harvard Business School Working Papers 10-098, Harvard Business School, revised Jan 2013.
  3. Guillaume Roger & Luís Vasconcelos, 2014. "Platform Pricing Structure and Moral Hazard," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(3), pages 527-547, 09.
  4. repec:rje:randje:v:37:y:2006:3:p:720-737 is not listed on IDEAS
  5. Bolt, Wilko & Tieman, Alexander F., 2008. "Heavily skewed pricing in two-sided markets," International Journal of Industrial Organization, Elsevier, vol. 26(5), pages 1250-1255, September.
  6. Ettore Damiano & Hao Li, 2007. "Price discrimination and efficient matching," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 30(2), pages 243-263, February.
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