Equivalence in Business Models for Informational Intermediaries

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