Deceptive Features on Platforms

Johannes Johnen and Robert Somogyi

No 3297, LIDAM Reprints CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: Many products sold on online platforms have additional features like fees for services, shipping, luggage, upgrades, and so on. We study when a two-sided platform shrouds additional features towards potentially naive buyers. We explore a novel mechanism according to which platforms shroud to manipulate network externalities between buyers and sellers. Exploring this mechanism, we argue the advent of online marketplaces led to less transparent markets. First, platforms have stronger incentives to shroud seller fees than sellers themselves. Second, platforms shroud their own fees less if they earn more revenue from sellers; so when sellers on the platform compete more fiercely, platforms—somewhat perversely—shroud more. We connect these results to many applications and the current debate on regulating online platforms.

JEL-codes: D18 D47 D83 L15 (search for similar items in EconPapers)
Pages: 24
Date: 2024-08-01
Note: In: The Economic Journal, 2024, vol. 134 (662), p. 2470–2493
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Deceptive Features on Platforms (2024)
Working Paper: Deceptive Features on Platforms (2022)
Working Paper: Deceptive Features on Platforms (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvrp:3297

DOI: 10.1093/ej/ueae016

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