Deceptive Products on Platforms

Johannes Johnen and Robert Somogyi

No 19-13, Working Papers from NET Institute

Abstract: On many online platforms, sellers offer products with additional fees and features. Platforms often deliberately shroud these fees from consumers. Examples are shipping fees, luggage fees on flight-aggregator websites, or resort fees and upgrades on hotel booking platforms. We explore the incentives of two-sided platforms to disclose additional fees and design a transparent marketplace when consumers might naively ignore shrouded additional fees. First, we find that platforms have stronger incentives to shroud additional fees than sellers in the absence of platforms. This result holds for monopoly platforms and in some competitive settings. Second, competition might induce platforms to regulate additional fees, which benefits consumers. We discuss connections to frequent practices like drip pricing, and platforms like Amazon or eBay regulating shipping fees.

Keywords: Two-sided markets; Deceptive products; Platform competition; Consumer mistakes; Shrouded attributes (search for similar items in EconPapers)
JEL-codes: D18 D42 D90 L13 L86 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2019-09
New Economics Papers: this item is included in nep-com, nep-exp, nep-ind, nep-mic and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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