Working paper

Platform Design Biases in Two-Sided Markets

Jay Pil Choi, and Doh-Shin Jeon

Abstract

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.

Keywords

Technology Adoption, Two-Sided Platforms, Non-Negative Pricing Constraint, Pass-through;

JEL codes

  • D4: Market Structure and Pricing
  • L1: Market Structure, Firm Strategy, and Market Performance
  • L5: Regulation and Industrial Policy

Replaces

Doh-Shin Jeon, and Jay Pil Choi, Platform Design Biases in Ad-Funded Two-Sided Markets, The RAND Journal of Economics, vol. 54, n. 2, August 2023, pp. 240–267.

Reference

Jay Pil Choi, and Doh-Shin Jeon, Platform Design Biases in Two-Sided Markets, TSE Working Paper, n. 20-1143, September 2020, revised February 2022.

See also

Published in

TSE Working Paper, n. 20-1143, September 2020, revised February 2022