 The Limits of Marketplace Fee DiscriminationNo 20-10, Working Papers from NET Institute Abstract: Platforms often use fee discrimination within their marketplace (e.g., Amazon, eBay, and Airbnb specify a variety of merchant fees). To better understand the impact of marketplace fee discrimination, we develop a model that allows us to determine platform equilibrium fee, category, and retail entry decisions that depend on the extent of fee discrimination available to the platform. Isolating the effects of fee discrimination (by not allowing the platform to enter into commerce), we find that greater fee discrimination allows the platform to serve more markets in its marketplace but also worsens double marginalization in the high surplus markets. However, if the platform enters into retail, then the platform reduces its fees and generates greater retail competition. These effects mitigate distortions from fee discrimination and improve welfare. In terms of policy, we show that (1) banning fee discrimination and platform entry is detrimental to welfare, (2) a vertical merger within a retail market mitigates double marginalization but is often worse than an equilibrium with platform entry into retail, and (3) taxing the platform in retail (not merchants) levels the retail playing field and can generate a Pareto improvement upon a policy that bans platform retail entry. Keywords: Platforms; platform retail entry; price discrimination; vertical integration; intermediary (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:net:wpaper:2010 Access Statistics for this paper More papers in Working Papers from NET Institute |
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