Price Discrimination by a Two-sided Platform: with Applications to Advertising and Privacy Design

Doh-Shin Jeon, Byung-Cheol Kim and Domenico Menicucci

No 15-08, Working Papers from NET Institute

Abstract: We study price discrimination by a monopoly two-sided platform who mediates interactions between two different groups of agents. We adapt a canonical model of second-degree price discrimination `a la Mussa and Rosen (1978) to a two-sided platform by focusing on non-responsiveness, a clash between the allocation the platform wants to achieve and the incentive compatible allocations. In this framework we address the key question of when a price discrimination on one side complements or substitutes a price discrimination on the other side. We offer two applications on advertising platforms and also highlight the role of commitment in eliciting personal information for targeted advertising.

Keywords: price discrimination; two-sided markets; non-responsiveness; privacy; advertising; positive/negative sorting (search for similar items in EconPapers)
JEL-codes: D4 D62 D82 M3 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2015-10
New Economics Papers: this item is included in nep-com, nep-ind, nep-mic, nep-mkt and nep-net
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