Platform Pricing Structure and Moral Hazard

Guillaume Roger and Luis Vasconcelos ()

No 2010-28, Discussion Papers from School of Economics, The University of New South Wales

Abstract: We study pricing by a monopoly platform that matches buyers and sellers in an environment with cross-market externalities. Said platform has no private information, does not set the commodity's price and can only charge trading parties for the transaction. Our innovation consists in introducing moral hazard on the sellers' side and an equilibrium notion of platform reputation in an infinite horizon model. With linear fees the platform can mitigate, but not eliminate, the loss of reputation induced by moral hazard. If lump-sum fees (registration fees) can be levied, moral hazard can be overcome. The upfront payment determines the participation threshold of sellers and extracts them, while (lower) transactions fees provide incentives for good behavior. This breaks the equivalence of lump-sum payments and linear fees (Rochet and Tirole (2006)). We draw implications for the role of subsidies (Caillaud and Jullien (2003)).

Keywords: Platforms; Two-Sided Markets; Reputation; Moral Hazard (search for similar items in EconPapers)
JEL-codes: D21 D82 L11 L12 L14 L81 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2010-11
New Economics Papers: this item is included in nep-com, nep-cta, nep-ind and nep-net
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Platform Pricing Structure and Moral Hazard (2014)
Working Paper: Platform Pricing Structure and Moral Hazard (2013)
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