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.
Technology Adoption, Two-Sided Platforms, Non-Negative Pricing Constraint, Pass-through;
- D4: Market Structure and Pricing
- L1: Market Structure, Firm Strategy, and Market Performance
- L5: Regulation and Industrial Policy
Doh-Shin Jeon, and Jay Pil Choi, “Platform Design Biases in Ad-Funded Two-Sided Markets”, The RAND Journal of Economics, 2022, forthcoming.
TSE Working Paper, n. 20-1143, September 2020, revised February 2022