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

See all articles by Soo Jin Kim

Soo Jin Kim

ShanghaiTech University - School of Entrepreneurship and Management

Romain Lestage

Central University of Finance and Economics

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)

ShanghaiTech University - School of Entrepreneurship and Management ( email )

100 Haike Rd
Pudong Xinqu, Shanghai
China

Romain Lestage

Central University of Finance and Economics ( email )

39 South College Road
Haidian District
Beijing, Beijing 100081
China

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