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Welfare Effects of Platform Price Discrimination on Either or Both Sides of the Market

ShanghaiTech SEM Working Paper No. 2021-011

8 Pages Posted: 6 Dec 2021 Last revised: 9 Mar 2022

See all articles by Soo Jin Kim

Soo Jin Kim

Government of Canada - Bank of Canada

Romain Lestage

East China University of Science and Technology

Multiple version iconThere are 2 versions of this paper

Date Written: March 9, 2022

Abstract

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

Kim, Soo Jin and Lestage, Romain, Welfare Effects of Platform Price Discrimination on Either or Both Sides of the Market (March 9, 2022). ShanghaiTech SEM Working Paper No. 2021-011, Available at SSRN: https://ssrn.com/abstract=3976072 or http://dx.doi.org/10.2139/ssrn.3976072

Soo Jin Kim (Contact Author)

Government of Canada - Bank of Canada ( email )

234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada

Romain Lestage

East China University of Science and Technology ( email )

Shanghai
China

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