Platform Governance and Information Disclosure in Markets with Add-Ons

Huixin She
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Huixin She: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements 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

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Abstract: Digital platforms display sellers' prices and collect ad valorem commissions. We study how these roles shape sellers' disclosure choices and a platform's incentives to regulate them. Sellers offer a base good and an avoidable add-on, which some consumers overlook when choosing sellers. Because commissions apply to the base good but not off-platform add-ons, add-on profit is passed through more than one-for-one into lower base-good prices, creating a competition multiplier. Hidden add-on prices can reduce efficiency while raising consumer surplus through this mechanism. A platform regulates disclosure to protect commission revenue, while mandatory transparency can improve efficiency but reduce consumer surplus.

Keywords: Platform governance; add-on pricing; consumer myopia; market transparency; ad-valorem commissions; shrouding; information disclosure (search for similar items in EconPapers)
Date: 2026-10-09
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