Strategic Delegation in Two-Sided Platforms: Tool or Trap, Conditional on Network-Effect Symmetry

Xiaojun Pan

EconStor Preprints from ZBW - Leibniz Information Centre for Economics

Abstract: Can observable managerial incentive contracts substitute for price transparency as a commitment device in two-sided platforms? Extending the framework of Hagiu and Halaburda (2014), we show that under monopoly, two-dimensional public delegation precisely reproduces the transparent-equilibrium allocation. Under Hotelling competition, a network-effect symmetry threshold partitions the parameter space: in the tool region (approximately symmetric network effects), delegation Pareto-dominates no delegation; in the trap region (highly asymmetric), the classical Fershtman-Judd dilemma re-emerges. Total social welfare under delegation equals that under transparency in both regions. Policy implication: in asymmetric markets, restricting asymmetric incentive contracts can resolve the dilemma among platform owners, although the restriction lowers consumer and total welfare relative to the unrestricted equilibrium.

Keywords: Two-sided platforms; strategic delegation; managerial incentive contracts; information transparency; platform regulation (search for similar items in EconPapers)
JEL-codes: D43 D82 D86 L13 L86 (search for similar items in EconPapers)
Date: 2026
New Economics Papers: this item is included in nep-mic
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