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A Preference-Based Model of Platform Competition

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  • Paolo Bertoletti

Abstract

We study platform competition by modelling the preferences of a “"representative buyer" ”over the services platforms provide and the commodities they intermediate. This captures an intensive margin of buyers’' participation which is neglected by the canonical setting, and delivers a welfare measure of platform quality. Assuming that sellers offer a large variety of commodities under monopolistic competition and free entry, in contrast to previous results we find that in a duopoly setting strategically chosen commissions (whose value depends on sellers’ expenditure share and demand elasticity) actually worsen buyers' ’welfare, which improves if platforms set commissions in advance of sellers' ’entry.

Suggested Citation

  • Paolo Bertoletti, 2022. "A Preference-Based Model of Platform Competition," Working Papers 486, University of Milano-Bicocca, Department of Economics.
    • Handle: RePEc:mib:wpaper:486
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    References listed on IDEAS

    as
    1. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899, January.
    2. Paolo Bertoletti & Federico Etro, 2022. "Monopolistic competition, as you like it," Economic Inquiry, Western Economic Association International, vol. 60(1), pages 293-319, January.
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    More about this item

    Keywords

    platform competition; market intermediation; exchange commissions;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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