Equivalence in Business Models for Informational Intermediaries

Résumé

An intermediary has the technology to provide information about a product to consumers and serves as a platform through which transactions between a monopoly and consumers take place. This paper explores the intermediary’s revenue maximization problem across all possible business models. By examining the revenue maximizing solutions under three critical business models, I discover that the market outcomes—consumers’ expected surplus, producer’s expected profit and the intermediary’s expected revenue—are equivalent across all business models if and only if the gains from trade are large enough, which provides some insights into, and implications for online selling platforms.