Welfare Effects of Platform Price Discrimination on Either or Both Sides of the Market
8 Pages Posted: 6 Dec 2021 Last revised: 9 Mar 2022
Date Written: March 9, 2022
We analyze the welfare effects of price discrimination by a monopolistic platform that mediates between two sides of a market. Discrimination is based on asymmetric costs on one side of the market and may be allowed on either or both sides. We show that unconstrained discrimination on both sides of the market improves welfare compared to uniform pricing but may be dominated by single-side discrimination. This result is driven by matching effects between sides, which add to the standard reallocation effects within sides.
Keywords: Net Neutrality, Zero-rating, Price Discrimination, Platform, Network Effects
JEL Classification: D4, L22, L43
Suggested Citation: Suggested Citation