Experimentation in Two-Sided Markets

Martin Peitz, Sven Rady and Piers Trepper

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: We study optimal experimentation by a monopolistic platform in a two-sided market. The platform provider is uncertain about the strength of the externality each side is exerting on the other. Setting participation fees on both sides, it gradually learns about these externalities by observing actual participation levels. This provides an informational rationale for introductory pricing, with the platform provider charging a fee below the myopically optimal level on at least one side of the market. If the externality that the other side exerts is sufficiently well known and weaker than the externality it experiences, the platform provider extracts surplus from that side by charging it a fee above the myopically optimal level. This interplay between learning and surplus extraction is crucial to the market outcome and its dynamics.

Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Published in Journal of the European Economic Association 1 15(2017): pp. 128-172

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Experimentation in Two-Sided Markets (2017)
Working Paper: Experimentation in Two-Sided Markets (2015)
Working Paper: Experimentation in Two-Sided Markets (2013)
Working Paper: Experimentation in Two-Sided Markets (2011)
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:lmu:muenar:55039

Access Statistics for this paper

More papers in Munich Reprints in Economics from University of Munich, Department of Economics Ludwigstr. 28, 80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Tamilla Benkelberg ().