Recommendation Design, Pricing, and Regulation

Laurenz Marstaller ()
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Laurenz Marstaller: University of Bonn

No 430, ECONtribute Discussion Papers Series from University of Bonn and University of Cologne, Germany

Abstract: This paper studies how platforms jointly choose fees and recommendations and their implications for fee regulation. A platform charges sellers a commission rate and ranks products based on price and match-value. The analysis shows that price-sensitive rankings intensify seller competition, allowing the platform to extract more surplus. Commission-rate caps constrain fees, but platforms may respond by making recommendations less price-sensitive, attenuating consumersurplus gains. By contrast, capped nominal fees can be more effective because they shift the platform’s incentives toward transaction volume rather than transaction value. Effective fee regulation must therefore account for how platforms adjust their recommendation policies in response.

Keywords: Algorithm Design; DMA; Platform Regulation; Platforms; Recommendations; Search (search for similar items in EconPapers)
JEL-codes: D43 D83 L13 L51 L86 (search for similar items in EconPapers)
Pages: 85 pages
Date: 2026-09
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Persistent link: https://EconPapers.repec.org/RePEc:ajk:ajkdps:430

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