Why Do Platforms Charge Proportional Fees? Commitment and Seller Participation

Muthers Johannes () and Sebastian Wismer
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Muthers Johannes: Department of Economics, Johannes Kepler University Linz, Altenberger Straße 69, 4040 Linz, Austria

Review of Network Economics, 2022, vol. 21, issue 2, 83-110

Abstract: This paper deals with trade platforms whose operators not only allow third party sellers to offer their products to consumers, but also offer products themselves. In this context, the platform operator faces a hold-up problem if he uses classical two-part tariffs only as potential competition between the platform operator and sellers reduces platform attractiveness. Since some sellers refuse to join the platform, some products that are not known to the platform operator will not be offered at all. We find that revenue-based fees lower the platform operator’s incentives to compete with sellers, increasing platform attractiveness. Therefore, charging such proportional fees can be profitable, which may explain why several trade platforms indeed charge proportional fees.

Keywords: intermediation; platform tariff; hold-up problem (search for similar items in EconPapers)
JEL-codes: D40 L14 L81 (search for similar items in EconPapers)
Date: 2022
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Related works:
Working Paper: Why Do Platforms Charge Proportional Fees? Commitment and Seller Participation (2023)
Working Paper: Why Do Platforms Charge Proportional Fees? Commitment and Seller Participation (2012)
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DOI: 10.1515/rne-2023-0020

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