Optional Intermediaries and Pricing Restraints

37 Pages Posted: 13 Apr 2021

See all articles by Chang Liu

Chang Liu

Harvard University, Department of Economics, Students

Fengshi Niu

University of California, Berkeley, Department of Economics, Students

Alexander White

Tsinghua University - School of Economics & Management

Date Written: April 3, 2021

Abstract

When a platform is an optional intermediary, should it require sellers to charge the same price to the platform’s users as they charge their direct customers? If the platform does this, how will it affect consumers’ and overall welfare? In a model leveraging insight from the study of third-degree price discrimination, we show that an interesting markup-versus-volume tradeoff governs the platform’s choice. Moreover, a drawing-in effect, geared towards low-valuation platform users, makes such a policy surprisingly appealing for consumers.

Keywords: Platform strategy, online intermediaries, price coherence, price discrimination

Suggested Citation

Liu, Chang and Niu, Fengshi and White, Alexander, Optional Intermediaries and Pricing Restraints (April 3, 2021). Available at SSRN: https://ssrn.com/abstract=3825163 or http://dx.doi.org/10.2139/ssrn.3825163

Chang Liu

Harvard University, Department of Economics, Students ( email )

Cambridge, MA
United States

Fengshi Niu

University of California, Berkeley, Department of Economics, Students ( email )

CA
United States

Alexander White (Contact Author)

Tsinghua University - School of Economics & Management ( email )

Mailbox A-44
Weilun Building
Beijing, 100084
China

HOME PAGE: http://alex-white.net

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