Equivalence in Business Models for Informational Intermediaries
67 Pages Posted: 1 Oct 2019 Last revised: 15 Sep 2020
Date Written: November 21, 2019
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: Suggested Citation