Platform Design Biases in Two-Sided Markets

Résumé

We investigate the relationship between market structure and platforms'incentives to adopt technological innovations in two-sided markets, where platforms may find it optimal to charge zero price on the consumer side and to extract surplus on the ad- vertising side. We consider innovations that a¤ect the two sides in an opposite way. We compare private incentives with social incentives and find that the bias in tech- nology adoption depends crucially on whether the non-negative pricing constraint binds or not. Our results provide a rationale for a tougher competition policy to curb concentration if competition authorities put more weight on consumer surplus in welfare calculations.