A Preference-Based Model of Platform Competition

21 Pages Posted: 14 Jan 2022

See all articles by Paolo Bertoletti

Paolo Bertoletti

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS)

Date Written: January 12, 2022

Abstract

We study platform competition by modeling the preferences of a "representative buyer" over the services platforms provide and the commodities they intermediate. This captures an intensive margin of buyers' participation which is neglected by the canonical setting and delivers a welfare measure of platform quality. Assuming that sellers offer a large variety of commodities under monopolistic competition and free entry, in contrast to previous results we find that in a duopoly setting strategically chosen commissions (whose value depends on sellers' expenditure share and demand elasticity) actually worsen buyers' welfare, which improves if platforms set commissions in advance of sellers' entry.

Keywords: D11, L13, L41, L51

JEL Classification: platform competition, market intermediation, exchange commissions

Suggested Citation

Bertoletti, Paolo, A Preference-Based Model of Platform Competition (January 12, 2022). University of Milan Bicocca Department of Economics, Management and Statistics Working Paper No. 486, Available at SSRN: https://ssrn.com/abstract=4007362

Paolo Bertoletti (Contact Author)

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milan, 20126
Italy

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