Working paper

Second-degree Price Discrimination by a Two-sided Monopoly Platform

Doh-Shin Jeon, Byung-Cheol Kim, and Domenico Menicucci

Abstract

We study second-degree price discrimination by a two-sided monopoly platform. The incentive constraints of the agents on the value creation side may be in conflict with internalizing externalities on the value capture side, which may render pooling optimal. Even without such conflict between the two sides, pooling can be optimal due to type-dependent Spence effects when the preferences of the marginal agents diverge from those of the average agents on the value capture side. We perform a welfare analysis of price discrimination and show that prohibiting price discrimination improves welfare when there is a strong conflict between the two sides.

Keywords

platform; price discrimination; two-sided markets; non-responsiveness; Spence effect.;

JEL codes

  • D4: Market Structure and Pricing
  • D82: Asymmetric and Private Information • Mechanism Design
  • L5: Regulation and Industrial Policy
  • M3: Marketing and Advertising

Reference

Doh-Shin Jeon, Byung-Cheol Kim, and Domenico Menicucci, Second-degree Price Discrimination by a Two-sided Monopoly Platform, TSE Working Paper, n. 16-690, September 2016, revised April 2020.

See also

Published in

TSE Working Paper, n. 16-690, September 2016, revised April 2020