Equivalence in Business Models for Informational Intermediaries

67 Pages Posted: 1 Oct 2019 Last revised: 15 Sep 2020

See all articles by Kai Hao Yang

Kai Hao Yang

Cowles Foundation for Economic Research

Date Written: November 21, 2019

Abstract

An intermediary has the technology to provide information about a product to consumers and serves as a platform through which transactions between a monopoly and consumers take place. This paper explores the intermediary's revenue maximization problem across all possible business models. By examining the revenue maximizing solutions under three critical business models, I discover that the market outcomes --- consumers' expected surplus, producer's expected profit and the intermediary's expected revenue --- are equivalent across all business models if and only if the gains from trade are large enough, which provides some insights into, and implications for online selling platforms.

Keywords: monopolistic pricing, outcome equivalence, screening, targeting, mechanism design, information design

JEL Classification: D42, D82, D83

Suggested Citation

Yang, Kai Hao, Equivalence in Business Models for Informational Intermediaries (November 21, 2019). Available at SSRN: https://ssrn.com/abstract=3457015 or http://dx.doi.org/10.2139/ssrn.3457015

Kai Hao Yang (Contact Author)

Cowles Foundation for Economic Research ( email )

New Haven, CT 06520
United States

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