Deceptive Features on Platforms

Johannes Johnen and Robert Somogyi

No 16175, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Many products sold on online platforms have additional features like fees for services, shipping, luggage, upgrades etc. We study when a two-sided platform shrouds additional features toward 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.

Keywords: Shrouding; Platforms (search for similar items in EconPapers)
JEL-codes: D18 D47 D83 (search for similar items in EconPapers)
Date: 2022-07
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Deceptive Features on Platforms (2024)
Working Paper: Deceptive Features on Platforms (2024)
Working Paper: Deceptive Features on Platforms (2022)
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