Platform Governance
American Economic Journal: Microeconomics, Forthcoming
47 Pages Posted: 8 Feb 2020 Last revised: 25 Oct 2021
Date Written: September 21, 2019
Abstract
Platforms that intermediate trades, such as Amazon, Airbnb, and eBay play a regulatory role in deciding how to govern the marketplaces they create. We propose a framework to analyze a platform's non-price governance designs and its incentive to act in a welfare-enhancing manner. We show that the platform's governance designs can be distorted towards inducing insufficient or excessive seller competition, depending on the nature of the fee instrument employed by the platform. These results are illustrated with micro-founded applications to a platform's control over seller entry, information provision and recommendations, quality standards, and search design choices.
Keywords: two-sided platform, platform designs, platform rules, business model
JEL Classification: L5, L15
Suggested Citation: Suggested Citation