Platform Governance

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