Price Discrimination by a Two-Sided Platform: With Applications to Advertising and Privacy Design

54 Pages Posted: 22 Oct 2015

See all articles by Doh-Shin Jeon

Doh-Shin Jeon

Toulouse School of Economics (TSE); Centre for Economic Policy Research (CEPR)

Byung-Cheol Kim

University of Alabama

Domenico Menicucci

Universita' degli Studi di Firenze

Date Written: September 30, 2015

Abstract

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

Suggested Citation

Jeon, Doh-Shin and Kim, Byung-Cheol and Menicucci, Domenico, Price Discrimination by a Two-Sided Platform: With Applications to Advertising and Privacy Design (September 30, 2015). NET Institute Working Paper No. 15-08, Available at SSRN: https://ssrn.com/abstract=2672058 or http://dx.doi.org/10.2139/ssrn.2672058

Doh-Shin Jeon (Contact Author)

Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Byung-Cheol Kim

University of Alabama ( email )

Culverhouse College of Business
Tuscaloosa, AL 35487-0223
United States
7708462727 (Phone)
7708462727 (Fax)

HOME PAGE: http://https://sites.google.com/site/byungcheolkim76/

Domenico Menicucci

Universita' degli Studi di Firenze ( email )

via delle pandette 9
Firenze, 50127
Italy
+39-055-4374666 (Phone)
+39-055-4374913 (Fax)

HOME PAGE: http://www.dmd.unifi.it/index.php?loc=personal&id=d.menicucci

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