Value allocation in two-sided markets

Abstract

We study value allocation in two-sided markets (such as payment cards, streaming platforms, online travel booking sites, ride-sharing apps, and search engines). We characterize two focal classes of allocation rules with strong normative grounds. A common feature of these classes is the possibility to give a premium treatment to one side of the market. This provides rationale for familiar practices of some platforms in real life, which charge one side (say, sellers) of the market for participating while subsidizing the other side (buyers) with various benefits (e.g., coupons and discounts) for joining them.

Keywords: platform, allocation rule, Shapley value, premiumaugmented Shapley solutions, premium-augmented equal-division solutions, two-sided market