Apparent Competition in Two-Sided Platforms

Gokhan Guven, Eren Inci and Antonio Russo

No 6660, CESifo Working Paper Series from CESifo

Abstract: We study a platform’s design of membership and transaction fees when sellers compete and buyers cannot observe the prices and features of goods without incurring search costs. The platform alleviates sellers’ competition by charging them transaction fees that increase with sales revenue, and extracts surplus via membership fees. It prices consumers’ membership below its cost to encourage their search. Examples include malls and online marketplaces. Most malls do not charge for parking while most lease contracts include percentage rents as well as fixed rents. Online marketplaces charge sellers for membership and per transaction while letting consumers access website for free.

Keywords: consumer search; membership fees; retail agglomeration; transaction fees; two-sided platforms (search for similar items in EconPapers)
JEL-codes: D21 D40 D83 L13 R33 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-com, nep-cta, nep-mic, nep-mkt and nep-pay
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