Platform Pricing Structure and Moral Hazard
We study pricing by a monopoly platform that matches buyers and sellers in an environment with cross-market externalities. Said platform has no private information, does not set the commodity's price and can only charge trading parties for the transaction. Our innovation consists in introducing moral hazard on the sellers' side and an equilibrium notion of platform reputation in an infinite horizon model. With linear fees the platform can mitigate, but not eliminate, the loss of reputation induced by moral hazard. If lump-sum fees (registration fees) can be levied, moral hazard can be overcome. The upfront payment determines the participation threshold of sellers and extracts them, while (lower) transactions fees provide incentives for good behavior. This breaks the equivalence of lump-sum payments and linear fees (Rochet and Tirole (2006)). We draw implications for the role of subsidies (Caillaud and Jullien (2003)).
|Date of creation:||Nov 2010|
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- Guillaume Roger & Luis I. Vasconcelos, 2010.
"Platform Pricing Structure and Moral Hazard,"
2010-28, School of Economics, The University of New South Wales.
- Ettore Damiano & Hao Li, 2007.
"Price discrimination and efficient matching,"
Springer, vol. 30(2), pages 243-263, February.
- repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
- repec:rje:randje:v:37:y:2006:3:p:720-737 is not listed on IDEAS
- 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.
- 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.
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