Marketplace Leakage

Andrei Hagiu () and Julian Wright ()
Additional contact information
Andrei Hagiu: Questrom School of Business, Boston University, Boston, Massachusetts 02215
Julian Wright: Department of Economics, National University of Singapore 117570, Singapore

Management Science, 2024, vol. 70, issue 3, 1529-1553

Abstract: A key issue for the design of online marketplaces is addressing leakage. Buyers may use the marketplace to discover a seller or to obtain certain conveniences, but the seller may then want to take transactions off the marketplace to avoid transaction fees. Assuming buyers are heterogenous in their switching cost or inconvenience cost of purchasing directly, we provide a model in which there is partial leakage in equilibrium. We use the model to analyze the trade-offs associated with different strategies the marketplace can use to attenuate the effects of leakage: investing in transaction benefits, limiting communication, charging referral fees, using price-parity clauses, introducing seller competition on the marketplace, and hiding sellers that try to induce too much leakage.

Keywords: platforms; disintermediation; showrooming; steering; two-sided markets (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.2023.4757 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:70:y:2024:i:3:p:1529-1553

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().