Why Do Platforms Charge Proportional Fees? Commitment and Seller Participation

Johannes Muthers and Sebastian Wismer

No 115, Working Papers from Bavarian Graduate Program in Economics (BGPE)

Abstract: If an intermediary offers sellers a platform to reach consumers, he may face the following hold-up problem: sellers suspect the intermediary will enter their respective product market as a merchant after they have sunk fixed costs of entry. Therefore, fearing that their investments cannot be recouped, less sellers join the platform. Hence, committing to not becoming active in sellers' markets can be profittable for the intermediary. We discuss different platform tariff systems to analyze this hold-up problem. We find that proportional fees (which are observed in many relevant real-world examples) mitigate the problem, unlike classical two-part tariffs (which most of the literature on two-sided markets examines). Thus, we offer a novel explanation for the use of proportional platform 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)
Pages: 30 pages
Date: 2012-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://bgpe.cms.rrze.uni-erlangen.de/files/2023/0 ... er-Participation.pdf First version, 2012 (application/pdf)

Related works:
Working Paper: Why Do Platforms Charge Proportional Fees? Commitment and Seller Participation (2023)
Journal Article: Why Do Platforms Charge Proportional Fees? Commitment and Seller Participation (2022)
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:bav:wpaper:115_mutherswismer

Access Statistics for this paper

More papers in Working Papers from Bavarian Graduate Program in Economics (BGPE) Contact information at EDIRC.
Bibliographic data for series maintained by Anton Barabasch ().