Platform Design Biases in Ad-Funded Two-Sided Markets

Jay Pil Choi and Doh-Shin Jeon
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Jay Pil Choi: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: We investigate how platform market power affects platforms' design choices in ad-funded two-sided markets, where platforms may find it optimal to charge zero price on the consumer side and extract surplus on the advertising side. We consider design choices affecting both sides in opposite ways and compare private incentives with social incentives. Platforms' design biases depend crucially on whether they can charge any price on the consumer side. We apply the framework to technology adoption, privacy, and ad load choices. Our results provide a rationale for a tougher competition policy to curb market power of ad-funded platforms with free services.

Date: 2023
New Economics Papers: this item is included in nep-com, nep-des, nep-pay and nep-reg
Note: View the original document on HAL open archive server: https://hal.science/hal-04470490v1
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Citations: View citations in EconPapers (3)

Published in RAND Journal of Economics, 2023, 54 (2), pp.240-267. ⟨10.1111/1756-2171.12436⟩

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Working Paper: Platform Design Biases in Ad-Funded Two-Sided Markets (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04470490

DOI: 10.1111/1756-2171.12436

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