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A Preference-Based Model of Platform Competition

Paolo Bertoletti ()

No 486, Working Papers from University of Milano-Bicocca, Department of Economics

Abstract: We study platform competition by modelling the preferences of a “"representative buyer" ”over the services platforms provide and the commodities they intermediate. This captures an intensive margin of buyers’' participation which is neglected by the canonical setting, and delivers a welfare measure of platform quality. Assuming that sellers offer a large variety of commodities under monopolistic competition and free entry, in contrast to previous results we find that in a duopoly setting strategically chosen commissions (whose value depends on sellers’ expenditure share and demand elasticity) actually worsen buyers' ’welfare, which improves if platforms set commissions in advance of sellers' ’entry.

Keywords: platform competition; market intermediation; exchange commissions (search for similar items in EconPapers)
JEL-codes: D11 L13 L41 L51 (search for similar items in EconPapers)
Pages: 21
Date: 2022-01
New Economics Papers: this item is included in nep-com, nep-mic, nep-ore and nep-reg
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