Price Discrimination by a Two-Sided Platform: With Applications to Advertising and Privacy Design
54 Pages Posted: 22 Oct 2015
Date Written: September 30, 2015
We study price discrimination by a monopoly two-sided platform who mediates interactions between two different groups of agents. We adapt a canonical model of second degree price discrimination a la Mussa and Rosen (1978) to a two-sided platform by focusing on non-responsiveness, a clash between the allocation the platform wants to achieve and the incentive compatible allocations. In this framework we address the key question of when a price discrimination on one side complements or substitutes a price discrimination on the other side. We offer two applications on advertising platforms and also highlight the role of commitment in eliciting personal information for targeted advertising.
Keywords: price discrimination, two-sided markets, non-responsiveness, privacy, advertising, positive/negative sorting
JEL Classification: D4, D62, D82, M3
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