Third-Degree Price Discrimination in Two-sided Markets

Alexandre De Cornière (), Andrea Mantovani and Shiva Shekhar
Additional contact information
Alexandre De Cornière: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Shiva Shekhar: TiSEM - Tilburg School of Economics and Management - Tilburg University [Netherlands]

Working Papers from HAL

Abstract: We investigate the welfare effects of third-degree price discrimination by a two-sided platform that enables interaction between buyers and sellers. Sellers are heterogenous with respect to their per-interaction benefit, and, under price discrimination, the platform can condition its fee on sellers' type. In a model with linear demand on each side, we show that price discrimination: (i) increases participation on both sides; (ii) enhances total welfare; (iii) may result in a strict Pareto improvement, with both seller types being better-off than under uniform pricing. These results, which are in stark contrast to the traditional analysis of price discrimination, are driven by the existence of cross-group network effects. By improving the firm's ability to monetize seller participation, price discrimination induces the platform to attract more buyers, which then increases seller participation. The Pareto improvement result means that even those sellers who pay a higher price under discrimination can be better-off, due to the increased buyer participation.

Keywords: Two-sided Markets; Price Discrimination; Network Effects (search for similar items in EconPapers)
Date: 2025-02-25
Note: View the original document on HAL open archive server: https://hal.science/hal-04965903v1
References: Add references at CitEc
Citations:

Downloads: (external link)
https://hal.science/hal-04965903v1/document (application/pdf)

Related works:
Working Paper: Third-Degree Price Discrimination in Two-Sided Markets (2024)
Working Paper: Third-Degree Price Discrimination in Two-Sided Markets (2023)
Working Paper: Third-Degree Price Discrimination in Two-Sided Markets (2023)
Working Paper: Third-Degree Price Discrimination in Two-Sided Markets (2023)
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:hal:wpaper:hal-04965903

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().