Platform Nonuniform Pricing on Either or Both Sides of the Market

Abstract

We analyze the welfare effects of nonuniform pricing by a monopolistic platform that mediates
between two sides of a market, consisting of symmetric buyers and asymmetric sellers, where
one group of sellers imposes a greater cost burden on the platform. We demonstrate that the
introduction of nonuniform prices on either or both sides of the market results in enhanced social
welfare compared to uniform pricing on both sides. This improvement arises from the prevalence
of cost-driven differential pricing over demand-based price discrimination. In contrast, when a
platform is permitted to set different prices on the buyer side alongside preexisting nonuniform
prices on the seller side, the price discrimination logic may dominate on the buyer side. In such a
case, whether welfare increases or decreases depends on a matching effect between sides, influencing the total number of interactions between buyers and sellers.

Keywords: Price Discrimination, Differential Pricing, Two-Sided Platforms, Network Effects, Regulation

JEL Classification: D4, L1