Platform design and rent extraction
Piolatto,Amedeo Schuett,Florian
Piolatto,Amedeo
Schuett,Florian
Abstract
We study the design of online platforms that aggregate information and facilitate transactions. Leading players in the industry (e.g., the Booking Group) hold two types of platforms in their portfolio: revealing platforms that disclose the identity of transaction partners (like Booking.com) and anonymous platforms that do not (like Hotwire.com). Anonymous platforms offer discounts but lead to inefficient matching between consumers and firms. We develop a model in which horizontally differentiated firms sell to heterogeneous consumers both directly and via a platform that enlarges the pool of consumers they can attract. The platform charges firms for transactions it intermediates and can choose to offer an anonymous sales channel in addition to a revealing one. We show that offering both sales channels is profitable not only because it allows the platform to implement price discrimination, as suggested by the literature on opaque selling, but also because it improves rent extraction. The anonymous channel breaks the link between the price on the revealing channel and the firms' outside option; moreover, it can reduce double marginalisation. The welfare impact of the anonymous channel is ambiguous: while it sometimes leads to market expansion, it also causes inefficiently high transport costs.
Description
Publisher Copyright: © 2024 The Author(s). The Journal of Industrial Economics published by The Editorial Board of The Journal of Industrial Economics and John Wiley & Sons Ltd.
Date
2025-03
Journal Title
Journal ISSN
Volume Title
Publisher
Research Projects
Organizational Units
Journal Issue
Keywords
Information, Competition, Reputation, Internet, Product, Search, Market, Obfuscation, Disclosure, Model, SDG 9 - Industry, Innovation, and Infrastructure
Citation
Piolatto, A & Schuett, F 2025, 'Platform design and rent extraction', Journal of Industrial Economics, vol. 73, no. 1, pp. 124-166. https://doi.org/10.1111/joie.12404
License
info:eu-repo/semantics/openAccess